One prediction made by a number of experts in Pensions & Investments' 25th anniversary issue five years ago was spectacularly wrong: that the U.S. faced a dozen more years of explosive growth of financial assets because of demographics.A few others got it right, predicting that the incredible market returns of the previous 15 years could not continue. One predicted a short-term bear market and possibly a global recession.
As part of the 25th anniversary issue, P&I's reporters asked pension executives, money managers and consultants to look into their crystal balls and predict the future as it pertained to institutional investing.
Some of the predictions were right on target. The jury still is out on a few more, although trends seem favorable. Others appear wrong.
Obviously, the United States did not experience a dozen more years of explosive growth in the financial markets after 1998. In fact, the Standard & Poor's 500 peaked less than two years later (March 24, 2000) and suffered a 49% decline in value before beginning to recover. That decline, according to research by Eric Bjorgen of the Leuthold Group, Minneapolis, Minn., was the third worst in 100 years.
Some of the other key predictions:
%A9;Pension funds would adopt greater levels of passive investment, and develop new investment structures designed to add value.
%A9;Pension funds would shift their focus to controlling risk from maximizing return.
%A9;There would be downward pressure on investment management fees.
%A9;Pension funds would start investing on a purely global basis, eliminating home-country biases.
%A9;New pension markets would develop in Europe, pouring money into global markets and pushing stock prices higher.
%A9;There would be consolidation on a global scale for money managers.