Much has been made of the gains available for pension schemes willing to buy those assets that banks – constrained by tougher capital requirements – are less able to access.
Towers Watson’s Ed Britton, speaking in our previous roundtable on fixed income investment, reiterated this "broken bank market" theme and how pension funds could benefit in areas such as direct lending and social housing
“The banks are still pulling out, shrinking their balance sheets and that is driving an awful lot of value opportunities still,” Ed said.
Another such area is addressed on the opposite page this week by JPMorgan Asset Management’s Bob Dewing, who looks at infrastructure debt, and finds the situation might not be as simple in this asset class.
The steady increase in demand, mixed with easing immediate liquidity that has triggered “the newfound willingness of a number of banks to maintain or increase their presence in the segment”, has weakened the argument a little. It should be added that Bob still sees value in the market.
Illustration by Ben Jennings
The response I have heard from a few investment experts over the past few years runs as follows: if banks are willing, albeit with their arms twisted, to give up certain assets, what does that say about the value of those investments?
Are they not ditching certain assets for a reason, and why should scheme investors be picking up their junk? In a video early last year, Richard Greening, chair of Islington Council's pensions subcommittee, discussed its pension fund's much-discussed residential property investment.
"Residential property as an asset class is something which pension funds should be invested in from the point of view of the long-term returns," he told my predecessor David Rowley, "not just the short term advantage which might be created by the banks being more restricted."
The councillor's reluctance to put the scheme's investment down to a short-term market opportunity, rather than its long-term value, was telling.
As journalists and commentators we discuss trends to give shape to the market, but trends alone should not shape ideas.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.