Pension fund investors should refrain from taking a reactive approach to the recent credit crunch or trying to make short-term adjustments to their portfolios to take advantage of the crisis, according to one expert.
“The market’s response to chaos is much quicker than [pension] plans’ formal governance structure can react,” said Bruce Curwood, director of investment strategy at Russell Investments. “[Pension funds] are dealing with quarterly meetings and annual and semi-annual events,” speaking at a dialogue on credit markets held in Toronto last night by MFC Investment Management.
Rather than a reactive approach, plans should put in place good governance structures that delegate investment decisions to managers, within established risk parameters. Curwood said plans should also incorporate a diversified investment strategy with a multi-manager structure to weather any market storms.
And, he added, when a crisis does hit, pension fiduciaries are best off posing timely questions to their money managers about fund exposures.
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