Two economists - three opinions!
Estimated reading time: 2 minutes
It used to be joked that if you had 99 actuaries in a room, you would get 100 best estimates. However, the current economic climate is causing economists to disagree wildly on the future. Head of Insurance, Scott Eason, reports from our Investment Conference.
Over 300 institutional investors and professionals gathered in London on 25 January for Barnett Waddingham’s 10th annual Investment Conference. The theme running throughout the day was whether the second-longest “Bull Run” in history could continue for another year.
The first plenary session was a very upbeat presentation from Karen Ward, Chief Market Strategist (UK & Europe) at JP Morgan Asset Management. Karen gave a strong argument that 2018 would not contain a significant market crash, which left everybody feeling warm and happy.
"So we went into lunch not knowing if we should be holding or selling our risk assets, and concerned about following the search for yield in private asset classes."
However, in the next panel session, Nils Jensen - CIO of Absolute Return Partners - agreed that Karen may be right in respect of 2018, but “guaranteed” that equity returns over the next ten years would be disappointing. Azhar Hussain, Head of Global High Yield at Royal London Asset Management, preferred bonds to equities at current levels. Peter Hecht, Managing Director of AQR, then warned of the dangers of investing in private assets, where if illiquidity premia are stripped out, often the return/risk ratio is considerably worse than public assets.
So we went into lunch not knowing if we should be holding or selling our risk assets, and concerned about following the search for yield in private asset classes.
This linked nicely into the two insurance-specific sessions that followed. The first focussed on how to carry out a successful manager selection exercise and continued monitoring. The second looked at options for protecting against equity falls, including looking at diversification, the ability of managers to take tactical asset allocation decisions and the use of derivatives to cost-effectively change the payout profile of an equity portfolio.
We then finished off the day with some wise words from the Rt Hon. Ken Clarke, who unsurprisingly focussed on Brexit and Europe. Interestingly, he felt that the current set of UK politicians were talented but that the huge economic generational divide, the existence of a 24-hour social media culture and a frenzied press had made life considerably more difficult for politicians.
A very well-run and interesting conference enjoyed by all and with promises of even bigger and better next year!