Pioneer Investments is to consider how it could incorporate non-traditional sources of return, which includes assets such as loans, into traditional investment mandates.
Pioneer asked an audience of about 180 of its top clients to vote for how the fund management firm could help investors overcome the challenges of finding non-traditional sources of return.
Just over a quarter (27%) – the highest percentage of the audience – voted in a multiple choice question to have non-traditional return sources included in traditional mandates.
Embracing new sources of return was the theme of the annual Pioneer Investments investor conference, which took place in Boston last week.
Hugh Prendergast, head of strategic product and marketing, Western Europe and international, said Pioneer would look in the months ahead at delivering new return sources through traditional mandates.
New return sources are needed against a backdrop that is characterised partly by weaker fixed income returns and by structural factors causing lower growth, the conference heard.
“Knowledge transfer” was the second most popular way for Pioneer to help clients overcome the challenges of obtaining non-traditional sources of return, getting 25% of the vote, followed by “Better definition of targets and risk budgets”, which got 20% of the vote.
“Transparency and reporting” and “Better measurement tools” were other options that polled lower.
The audience expressed its concern that a shortage of income from investments is not just a temporary issue centred on low interest rates. Just over 60% said they did not expect the income shortage to be resolved with rate rises, though the remaining 39% of investors did expect rates to resolve the issue.
“The biggest single issue over the next 5, 10, 20 years will be income shortage,” said Prendergast, pointing to demographic influencers, such as an increased shortage of workers as a proportion of adult populations in various countries.
He also highlighted how regulations – such as Solvency II, Basel III and the European Market Infrastructure Regulation – are creating a “distortion” for the long-term saving community’s investment strategies by forcing them into bonds that are highly rated, but pay low income.
Non-traditional sources of return in fixed income would include global loans, and also bond investments benchmarked against GDP-weighted benchmarks.
More broadly, non-directional investing, such as through liquid alternatives, are another option.
Thirty-eight per cent of the audience said they were targeting between 20% and 40% of their total return from non-directional strategies. The majority, 50%, said they were targeting less than 20%.
was the conference media partner.
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