Like many people in our industry, I remember where I was when the 2008 financial crisis hit.
I’d been with Rogers for one year as managing editor of Benefits Canada and was keen to prove my ability to move into the newly vacated editor role. Eager to broaden my knowledge and network, I attended the Association of Canadian Pension Management’s annual national conference in Lake Louise.
I was munching appetizers, making small talk and admiring the view, when I got an urgent email from my boss’s boss. I don’t remember the exact wording, but the gist of it was, Get ready…we’re in for a rough ride.
On Sept. 15, 2008, Lehman Brothers filed for bankruptcy—and the too-big-to-fail concept went out the window.
As the news broke, everyone was checking their phones and scanning the newswires. Frantically, I emailed our web editor to make sure he was on it. (He was.)
We all know what happened next.
At the centre of it all was risk. People took risks buying houses they couldn’t afford, and financial institutions took risks by lending to them. Investors took risks buying complex instruments containing those mortgages and other assets that weren’t properly hedged for default, which they didn’t fully understand.
When it all fell apart, Canadian investors—who tend to be more conservative—became even more risk-averse. The dialogue around investing changed: instead of maximizing returns, it was all about minimizing risk.
But risk isn’t inherently bad—and, for pension plans, it’s necessary. You can’t fund long-term pension obligations by holding cash. Markets had some great upswings, starting in 2009 after the dust settled. If you didn’t participate, you didn’t reap the rewards.
The lesson from 2008 isn’t to fear risk. Rather, it’s to understand the nuances of the specific risks you’re taking, and then make an informed decision about whether or not it’s worth it.
Why the look back? I guess I’m feeling a bit nostalgic…I’m leaving Benefits Canada to take on a new role with Buck Consultants. It’s a great opportunity, but I can’t help feeling a little sad saying goodbye to a job that’s taught me so much and introduced me to so many wonderful people.
Clearly, the past eight years have had some significant ups and downs, but it’s always been interesting. Thanks for coming along for the ride.
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