Making hay while the sun isn’t shining

For many, the analogy of making hay when the sun shines focuses on the final stage of the operation and taking the opportunity to reap the end product. But for Niall O’Sullivan, EMEA and Asia Chief Investment Officer at Mercer, the process starts much earlier than that.

Preparing the soil, protecting the field and using experience to gauge the right time to harvest are just as important as mowing the field – and the analogy can be applied to pension funds.

Having a clear, articulated objective, journey plan, well-diversified portfolio and governance structure, enable a pension fund to benefit when bright opportunities come its way.

“Clients that have been with us for the pre-COVID-19 period of substantial returns from growth portfolios typically hit a number of funding level triggers,” said Niall. “This allowed them to bank the good days to move up from their growth assets to their matching assets.”

And it is here where the preparation can also truly pay off: when the sun is hidden behind layers of cloud.

“When the noise came, their funding levels were much more resilient than they would have been,” he said.

Within existing growth strategies, Niall highlighted that in order to outperform you do need to take risk. Therefore, as markets fell in March, these portfolios did fall. A wide spread of risk and return drivers meant that the falls were considerably less than equity markets. However, having a clarity of view and having a plan in place enabled investors to recoup these losses and seize opportunities saw Mercer clients capture a substantial rebound as markets recovered.

“We’re able to effectively accelerate out the other side in April and May, and get back to, very similar levels to where we would have started the year,” said Niall.

Access the full Q&A session below, part of our Get future-ready – Investing for better governance live conference in association with Professional Pensions:

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