CFA Institute 11 February 2022
Managing Pension Funds for Sustainable Long-Term Return
CFA Institute Alpha Summit APAC
Virtual Session: Video On Demand
CFA Institute Alpha Summit APAC, a two-day virtual conference focusing on the investment industry’s biggest challenges and most compelling trends across Asia Pacific, was held on 10-11 February 2022.
The Mercer CFA Institute Global Pension Index 2021 highlights repercussions of the global pandemic and ongoing health crisis on retirement systems globally. While many funds strive for sustainable long-term return, they must also deal with the current realities of extreme valuations and low expected returns, historically low interest rates, and other economic pressures. What strategies are funds employing in their capital allocation, ESG integration and portfolio optimization process to achieve their long-term financial objectives and better outcomes for retirees?
- Mark Delaney, CFA, deputy CEO and chief investment officer, AustralianSuper
- Na Li, CFA, board director, CFA Society Beijing
- Renuka Sane, associate professor, National Institute of Public Finance and Policy, India
- Janet Li, CFA, partner and wealth business leader at Mercer
Watch the Video
Delivering Long-Term Returns: A Global Retirement Priority
The World Economic Forum white paper on transformational investment identifies the topic of demographic shifts as one of the six key global systemic risks. Delivering sustainable long-term returns will be an essential priority for pension systems around the globe. The panellists bring their expert knowledge of the pension systems in China, Australia, and India to provide insightful overviews of their respective markets, how they are structured, the current issues, and what lies ahead.
“China’s pension market has achieved remarkable results in the past 30 years,” explains Li, and “More reform measures are expected.” In contrast to the well-established Australian pension system with universal coverage, Sane shines a light on the Indian experience. Coverage is restricted to a “maximum 15 percent of the working population,” and the pensions market is “very fragmented.”
Improving Financial Literacy
For Sane, financial illiteracy among the general population, both in India and more widely, is an issue that should concern the financial industry, particularly as the world looks to build better defined-contribution pension systems: “It is extremely important to improve financial literacy so people can make better decisions.” However, she acknowledges the onus falls on the advisory market. “At the end of the day, people aren’t going to make every investment decision themselves; they will also go to a financial adviser or retirement planner,” says Sane. “A good advisory market complements financial literacy, and you can’t have one without the other,” she adds. With both in play, it will be possible to convince people to move away from low-return, low-risk products and diversify their portfolios.
ESG-Related Thinking: Front and Centre
According to Delaney, ESG considerations are a “must do.” This is a far cry from 10-years ago when many thought it was for activists, not investors. “If you’re not doing ESG, I don’t think you’re investing properly,” he says. Investment officers need to actively integrate ESG assessments into the decision-making process, identify any key ESG or emerging risks, and then calculate the financial implications.
Investors also need to hold companies to account, “If they pay you lip service, then you know they’re really just greenwashing,” he says, observing that this would add risk to a portfolio.
Ethical Investing: A Requirement, Not a Recommendation
The ethical investing message is spreading in China. At the end of the second quarter of last year, 77 institutions in China had signed up to the UN-supported Principles for Responsible Investment, and the assets under management of ESG-labelled mutual funds had reached Rmb250 billion (US$39 billion). Li outlines how China’s pension system is embracing ESG concerns, the expansion of investment choices available to Chinese pension funds, and why “long-termism is always a golden rule that we must adhere to.” She concludes by calling ESG investment a “requirement” rather than a “recommendation.”
CFA Institute Alpha Summit APAC 2022
Virtual Sessions - Video On Demand:
- Welcome and Opening Remarks: Think Beyond the Horizon
- Fireside Chat: Progress in Greening the Financial System—Lessons Learned and Looking Forward
- Panel Discussion: Climate Change Risk – Action for Industry Stakeholders
- Panel Discussion: Global and Regional ESG Regulations and Standards – Implications for the Financial Services Industry
- Panel Discussion: The Pandemic’s Impact on Shareholder Activism
- Keynote and Fireside Chat: SDG Investing
- PGIM Sponsored Session: 2022 Best Ideas - The Road to Renewal
- Panel Discussion: Managing Pension Funds for Sustainable Long-Term Return
- Panel Discussion: Trends and Changes in Capital Markets Formation
- Fireside Chat: Future of the FinTech Eco-System
- Panel Discussion: Investment Management Professional of the Future
Renuka specialities include household finance, credit and bankruptcy, and pensions, as well as consumer protection in finance and the regulatory state. She is currently a member of the Pension Advisory Committee of India’s Pension Fund Regulatory Development Authority. Also, she sits on the personal insolvency working group of the Insolvency and Bankruptcy Board of India. Previously, Renuka worked with the individual insolvency research team at the Bankruptcy Legislative Reforms Commission. Renuka has a PhD in economics from the University of New South Wales and holds a master’s degree in economics from Mumbai University.
Janet Li, CFA, MAoF, is a Partner and the Asia Wealth Business Leader at Mercer. She oversees and is responsible for Mercer’s Wealth (Investment and Retirement) Business in Asia. In her role, she leads and drives strategic growth to the business as well as its operations and implementations. Janet has vast experience working with institutional clients (sovereigns, pension, insurance, corporate and wealth management). Her experience also spans across a wide range of retirement and investment services (asset liability review and strategy, portfolio construction, manager review, selection and monitoring, investment governance and transformation, discretionary management, member communication and education and related tools’ developments) and a diverse range of asset classes (public equities and fixed income, private equities, illiquid credit, real estate and infrastructure).
Mark Delaney was appointed Chief Investment Officer and Deputy Chief Executive Officer of AustralianSuper in July 2006. He is now responsible for investing close to AU$230 billion of retirement savings. With over 20 years of financial-market experience, Mark was previously the Head of Investments then CEO at STA. He has also held senior positions with AXA and the Federal Treasury. Mark holds a bachelor’s degree in economics and is a Chartered Financial Analyst. In addition, he is a director of the IFM investment advisory board and the Vice Chair of the Pacific Pension & Investment Institute.
Na Li is a director of the National Council for Social Security Fund (NCSS). She has 16-year experience in China’s pension investment industry. She also participated projects in Macro Dept. of Development Research Center of the State Council and China Social Insurance Association, focusing on issues such as local government debt, economic risk appraisal and the supervisory mechanism of pension fund investing. She is a senior volunteer and now is the board member of CFA Society Beijing. She also served as Member of Continuing Professional Development (CPD) Design Council for CFA Institute from Dec 2018 to July 2020. Ms. Li holds a bachelor’s degree in economics and a master’s degree in finance from Beijing Normal University.