Day two of FundForum 2023 saw a panel delve into strategic asset allocation, risk parity and global investing challenges, highlighting the importance of correlation analysis, judgement in allocating assets and liquidity considerations.
Elena Manola-Bonthond, the chief investment officer of CERN Pension Fund, emphasised the significance of strategic asset allocation as a long-term benchmark rather than a constraint. With a focus on risk parity, Manola-Bonthond highlighted the necessity of meticulous correlation evaluation, particularly during periods of heightened inflation uncertainty.
Manola-Bonthond also underscored the importance of adopting a quadrant approach to portfolio management, acknowledging the possibility of portfolios facing challenges during stress tests.
Addressing the challenge of allocating assets to emerging markets, Manola-Bonthond disclosed that her company currently maintains an "underweight" allocation in these regions. She outlined the intricacy involved in quantifying and predicting asset allocation to distant markets while also shedding light on the potential unforeseen opportunities that may arise from prevailing market tensions.
Joachim Köhne, PhD, the head of treasury at Hamburger Sparkasse, discussed the significant risks associated with long-term pricing, particularly interest rates and private debt costs. Köhne emphasised the importance of closely monitoring mortgage obligations and the behaviour of financial institutions.
Köhne encouraged investors to explore alternative opportunities beyond traditional asset classes to navigate the changing investment landscape effectively.
The panel discussions underscored the critical role of liquidity and adopting a risk parity perspective in asset analysis. Köhne highlighted the need for international diversification in portfolio management, considering geopolitical changes and their impact on geographical allocation.
Evaluating financial models against real-world scenarios was also deemed crucial by Köhne to ensure effective risk management.
Dirk Jargstorff, senior vice president of pensions & related benefits at Robert Bosch GmbH, emphasised the significance of prime targets in investment strategies. These targets encompass generating returns, incorporating sustainability considerations and effectively managing risks.
Jargstorff also underscored that the triad of return, sustainability and risks determines the best outcomes for investors.
The discussion concluded by delving into the application of traditional toolkits to manage market volatility. Jargstorff advocated for maintaining the frequency of risk protection measures, conducting analyses of return projections under different scenarios every three months.
Jargstorff also highlighted the importance of judgement in environmental, social and governance (ESG) conservation within portfolios, citing examples of active decision-making processes.
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