Searching for security: The role of secure income for pension funds in extraordinary times
Wild market swings as a result of COVID-19 have rightly led many investors to question the role that different asset classes hold in their portfolios. And for institutional investors, in particular, this is an opportune time to review whether the assets they hold are best suited to their overall objectives.
As a result of this period of reflection, there could be a far stronger demand for real asset strategies, as these are able to address investors’ needs in three areas: long-term contractual cashflows that are often contractually inflation-linked; lower risk via strong counterparties; and returns that are expected to be ahead of those delivered by liquid bonds with a similar risk profile.
“Secure-income” strategies are defined by cashflow and risk characteristics, rather than asset class or sector labels. Importantly, they solve the challenge of delivering a reasonable level of income generation in a relatively low-risk manner, with a target of achieving a 3 pe