Investors need to consider dynamic rather than static asset allocation and should implement robust investment processes to counter greater market volatility, following the outbreak of the coronavirus pandemic.
During the Pensions and Lifetime Savings Association's annual investment conference, investors discussed how the coronavirus pandemic has shaped their thinking about investment risks.
Bonds and equities are likely to start to move in correlation once inflation starts to increase, said Niall O'Sullivan, CIO Europe, Middle East and Africa and Asia for investment solutions at Mercer, who noted that these asset classes have in previous years tended to offset each other in terms of performance.
Investors should expect much more volatile investment conditions while returns will be lower following the recovery, Mr. O'Sullivan added.
David Vickers, CIO of Brunel Pension Partnership, Bristol, England, said that markets have already seen a V-shaped recovery in the past 12 months but he is not expecting inflation risk to increase in the short term. Brunel's local authority pension fund members have £30 billion ($41.5 billion) in assets.