What would you do?

Dear Ladies and Gentlemen

Just imagine you were managing a multi-billion pension fund with thousands of policy holders expecting you to deliver sufficient returns in order to grant to them a pension that will allow them to pay their bills once will be retired.

What would you do? How would you allocate the money that was entrusted to you?

Ladies and Gentlemen, the largest investors on this planet are pension funds. They invest their policy holders’ money either directly or via mandates. Mandates means the pension funds give the policy holder’s money to banks, brokers, asset managers who then manage parts of the pension funds’ portfolios. Both approaches have their pros and cons but this is not part of today’s weekly.

Now, every month there is new money from pension fund policy holders’ (premiums deducted from salaries) arriving at the pension funds. Furthermore many economies still count growing working populations. This means new workers/employees joining pension funds, which again leads to more money to be managed. This money needs to be invested and it needs to yield a positive return over time. Frankly speaking, this is quite a challenge. In an environment of ultra-low or even negative interest rates, macro-economic uncertainty, and political threats, investors prefer to keep their powder dry before investing. However, eventually a pension fund manager needs to invest as cash on accounts may yield negatively, not to mention inflation, as low as it may be, it should still be that any sort of investment return covers at least underlying inflation.

I personally believe it is always interesting to think about where the largest investors, who not only manage unbelievable amounts of money but on top of that and by definition need to follow a very long-term approach, put their money.

I am curious and this is why I am asking you to let me know how you would invest your policy holders’ money, if you were a pension fund manager. I will consolidate your suggestions/ideas and then let’s see what comes out of it. Maybe we can draw conclusions from this for our own investment style.

Now, Ladies and Gentlemen, I encourage you to send me your concise ideas but please don’t forget (instead of hitting the reply button) to send your messages to:

smk@incrementum.li

Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend.

Kind regards.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG