Investors will need to deal with a volatile investment environment for longer than previously anticipated, pension fund CIOs said in a panel discussion.
Speaking at the Pensions and Lifetime Savings Association's annual investment conference in Edinburgh on Tuesday, Wyn Francis, CIO of Brightwell, said markets are "less than helpful" when it comes to the investment outlook right now.
"We are more likely to stay in a volatile period for a while," he said. Brightwell manages assets for the £47 billion ($58.5 billion) BT Pension Scheme, London, and for other pension funds as an OCIO.
Liz Fernando, CIO of the £30 billion multiemployer defined contribution plan National Employment Savings Trust, London, added in the same discussion that it is taking longer for this inflation wave to move through than investors expected.
Ms. Fernando added that achieving targeted returns is currently a challenge with inflation above 8%.
But chief investment officers speaking on the panel still see some opportunities in this challenging environment.
Mr. Francis said that the ongoing trend of bank disintermediation could be fruitful over the next 18 months for institutional investors.
"When we have seen such an aggressive tightening cycle ... conditions aren't conducive for traditional lenders to be active in this market. It opens up opportunities in the private credit space," he said.
Ms. Fernando added that NEST recently invested in inflation-linked real estate and has started to look into timber as an investment area.
NEST is also looking into themes such as natural capital climate adaptation and social factors via active thematic portfolios that "climate-aware funds don't tackle," Ms. Fernando said.
Tony Broccardo, CIO of the £30 billion Barclays U.K. Retirement Fund, London, added during the same panel discussion that with interest rates and credit yields higher, investors can expect to find opportunities in emerging markets equities and Japanese equities.
"A managed rebalancing approach can help you get into those opportunities. There is a lack of ownership in emerging markets for example, people are trying to look for entry points. Japan is on the agenda again," he added.
