How should pension funds be reacting?
Unger: Their reactions should be closely linked to their “governance capability” — their internal resources, skills and decision-making framework. Only funds that have strong governance and the ability to think through potential outcomes should react at this time. The potential for regret — doing something that doesn’t turn out to be correct — is quite high right now. Macdonald: I think they have to take a step back. Acknowledge they are long-term investors and are doing things for strategic reasons. Acknowledge their mission is not to make tactical calls on markets, get out of equities just before they fall and then get back in again. They’re long-term investors holding risky assets. There will be times, like now, when that strategy is not beneficial. Ruloff: And the long-term strategies generally remain the same. However, these long-term strategies should reflect the current market environment. Right now there is a decline in Treasury bond rates and a move up in corporate bond rates.
