Pensions - Articles - Pensions need principles framework for events like Iran war

Speaking at the Pensions UK Investment Conference in Edinburgh, during a session on Investment Strategies in Turbulent Times, Mikulskis said it was important that the UK’s largest asset owners - eight of which now control around £0.5 trillion in assets - follow a clear set of principles rather than simply reacting to events as they unfold. Speaking after the session, he said:

 

“We’ve seen it many times before that the biggest risk can be over-reacting to the noise in global markets. A useful starting point in times like these is that the consensus is probably right and has probably already been priced in by the markets. It helps to have some humility. It’s also important to remember that volatility and uncertainty are the norm in markets rather than the exception.

 

“In an uncertain environment, the first thing you need are sharply defined principles and beliefs to guide your focus, and activity in developing these for large asset owners is time well spent in my view.

 

“Secondarily, asset owners need to create a system that synthesises a diverse range of trusted information sources on a repeatable basis, distilling it into a useful format that can be applied to the dozen or so key investing decisions an organisation faces.

 

“That’s really the challenge for asset owners. It’s not about where the price of oil will be next week, or what happens to next month’s employment numbers. It’s about the process and steps you put around it all to reach a solution you can act on.

 

“One takeaway from the current situation is that having large sector-level positioning can lead to considerable risk, as individual sectors can undergo sharp reversals even when the overall market is relatively benign.”