This paper provokes debate and offers insights into certain considerations for institutional investors as they develop their strategy toward the possible expansion of in-house investment-related activities.
Over the past 20-plus years, institutional investors, like other diversified investors, have had to survive the whipsaw of market swings, including the bursting of the “dot com’’ bubble in 2000 and the crash associated with the “The Great Recession’’ of 2008.
Unlike other institutional investors, however, many pension funds have fixed (or growing) liabilities on their balance sheets that must be managed, notwithstanding periods of low returns. As a result, pension funds are seeking higher returns to make good on their obligation to satisfy specific retirement funding levels for workers. This challenge has driven many pension funds to shift investments away from low-risk, fixed-income government and corporate bonds in favor of equities and alternative investments (alternatives).
This paper is intended to offer insights into certain considerations for institutional investors as they develop their strategy toward the possible expansion of in-house investment-related activities. Importantly, we aim to provoke debate and offer ideas for navigating the current cluttered landscape. We ask for readers’ opinions, even if they may differ from our points of view that follow, on the developments that are changing the business and operating models of investors and asset managers alike. Both face pressing issues in a rapidly changing environment.