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| Keith Ambachtsheer, a keynote speaker at the marcus evans European Pensions & Investments Summit 2012, comments on designing sustainable pension funds for the long-term. |
London, Apr 19, 2012 - (ACN Newswire) - In today's economic environment, sustainability is crucial. Unfortunately, the traditional Defined Benefit (DB) and Defined Contribution (DC) models cannot achieve this, says Keith Ambachtsheer, Director, Rotman International Center for Pension Management & Founder, KPA Advisory. By looking towards high quality equity investments that yield four, five, or even six per cent, investors will benefit from sustainable cash flows in the long-term.
A keynote speaker at the upcoming marcus evans European Pensions & Investments Summit 2012, 14 - 16 May, Ambachtsheer discusses the need for transparency and sustainability in the pensions marketplace.
- Why does the pension fund system need to evolve and how can this be done?
Keith Ambachtsheer: The market currently expects the two pension models, DB and DC, to do two things: provide affordability of pensions and certainty of pension payments. Realistically, neither one of the models can achieve that. Two separate instruments are required: a long horizon wealth creation instrument and a shorter horizon payment certainty instrument.
Long horizon wealth creation programmes acquire and nurture current and future cash flows. Buying these cash flows is getting cheaper, creating interesting investment opportunities. However, it will not be a prosperous time for those concerned with buying payment certainty, because the rate of interest on 'risk free' instruments is very low. We used to believe sovereign debt was risk free, but we are now even questioning that. Investment programmes that focus on short-term payment certainty will struggle, as they will need to redefine what a risk free asset is.
- How can we achieve fairness and transparency within the pension system?
Keith Ambachtsheer: Once the pension fund design is right, Chief Investment Officers (CIOs) will have to be able to provide reports on a regular basis and assure participants that the payment certainty system is sound because there is enough money to make the payments, and that the long-horizon investment programme is strong as its investments are yielding four to six per cent with some prospects for growth.
- How can pension sustainability be achieved?
Keith Ambachtsheer: If we want a sustainable pension system, we must design investment instruments that are sustainable. That is obvious. The question is, why has this not been achieved?
To reiterate, traditional DB and DC arrangements are both problematic in design. We expect them to do two things when they can only do one. CIOs must separate long horizon investing from short-term payment certainty investing. Once this has been done, long-term horizon investors will be able to buy great companies yielding four to six per cent and benefit from the prospect that dividends will be inflation-indexed over the longer term. Thus, there will be growth on top of that. Examples are companies such as Procter and Gamble, Johnson & Johnson and Nestle, with their portfolios of recession proof products. These are products that will keep selling, creating a sustainable cash flow in the long-term.
The Dutch are currently leading the way in turning their old pension system into a more sustainable one. They are the ones to watch.
About the European Pensions & Investments Summit 2012
Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes visionary presentations and interactive forums on looking beyond volatility to pinpoint innovative investment approaches, modernising risk models and delivering returns in the new era of pension investing.
For more information please send an email to info@marcusevanscy.com or visit the event website at www.epi-summit.com/KeithAmbachtsheerInterview
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Please note that the Summit is a closed business event and the number of participants strictly limited.
Contact:
Stacey Melvin,
Journalist, marcus evans, Summits Division
Tel: + 357 22 849 400
Email: press@marcusevanscy.com
Topic: Trade Show or Conference
Source: marcus evans Summits
Sectors: Daily Finance
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