The seeming consensus that emerged from Pensions & Investments' latest conference on the Global Future of Retirement was fairly bleak for pension executives: the trend — when it comes to capital markets and economic growth globally — isn't your friend.
A cautionary tone about the short- to medium-term outlook as well as the long term dominated the conference in New York on June 26-27.
A global economy that generates only "low-yield, low-rate-of-return investment opportunities" is leaving investors under pressure to add risk ahead of a likely economic downturn in coming years, said Arthur R. Kroeber, Hong Kong-based editor and head of research with Gavekal, a China-focused research firm, speaking on the conference's opening panel.
And a number of conference speakers predicted the challenges facing pension fund executives in securing the returns needed to provide beneficiaries with a comfortable standard of living in retirement could prove more permanent than cyclical.
"Demographics, high debt loads, low productivity" all point to lackluster growth for a long period of time, said Michael K. Lillard, Newark, N.J.-based head and chief investment officer of PGIM Fixed Income, on the conference's opening panel.
That tepid outlook might be more than just a hangover from central bank policies, which have left "tons and tons of cash chasing income," he said, predicting investors struggling now with global growth in the 3% range are going to have to "get used to 2%."
Global growth is "heading toward a range of below 3%," agreed economist and author Marc Levinson, in a keynote address at the close of the conference's first day.
Productivity growth, the only real answer to the problem, is more a matter of demographics and moving segments of a country's workforce from less productive areas, like farming, to more productive employment, like manufacturing, said Mr. Levinson. For the most part, governments — after reaping low-hanging fruit such as investing in national road networks — simply lack policy options for sustaining strong productivity gains, he said.
If the global outlook offers slim pickings for retirement plans, the landscape isn't entirely bereft of opportunities, speakers said. High-quality commercial mortgage-backed securities, AAA-rated collateralized loan obligations and the bonds of money-center banks all offer potentially attractive returns now, noted PGIM's Mr. Lillard. Still, those investments amount to "singles" in the game of investing. "We don't see home runs" on the horizon, he said.