LGC Investment Supplement - June 2012

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Investment professionals know only too well the one thing markets hate is uncertainty. Unfortunately there is still rather a lot around and how funds are continuing to react and respond to the challenging climate is, arguably, the common theme of this LGC Investment supplement.

Yes, May’s agreement on the Local Government Pension Scheme may mean we are finally starting to see some much-needed clarity regarding its future shape but there are still risks galore out there - the eurozone, our ageing population, maturing funds and declining membership levels, inflation and market volatility - that are set to be focusing the minds of fund managers for the foreseeable future.

Yet what is also clear is pension funds - and local authorities generally - are looking to innovative solutions rather than simply retreating into a risk-averse mentality.

Moreover, much as adversity is often said to be a catalyst for great art, there is a debate to be had about whether the challenging environment may actually lead to the emergence of a better skilled, better rounded local government pension fund manager.

This isn’t, of course, to imply fund managers lack the skills to do their jobs effectively - if anything, the successful and measured way we’ve seen funds being managed since 2007-08 shows how well most managers have navigated a very difficult course.

But the fact that teams are becoming more multi-disciplinary so as to bring in a wider range of skills, outlooks and competencies to cope with the challenging climate is potentially a very optimistic signal for the future.

When things do (one day) improve, it will mean local authority pension funds will be being managed by a generation of fund managers who, battlehardened from managing years of adversity, austerity and volatility, will be even more capable of providing the firm, nuanced leadership required.

Given that perhaps one of the biggest challenges - the ageing of our working (and pensionable) population - is one that will not be going away any time soon, that is, perhaps, at least something to be optimistic about.

Nic Paton, editor

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Expert Opinions in the Supplement Include:

Comment - Preparing for uncertainty

Christopher Nichols, investment director, Standard Life Investments

Comment - Managing in difficult circumstances

Bernard Abrahamsen, head of sales and distribution, M&G Investments

Comment - Advances in passive investing

Kevin Cullen, client relationship manager - Local Authorities, SSgA