DC plan sponsors are increasingly turning to collective investment trusts instead of mutual funds for their lower costs, flexibility and efficiency. There are key differences in how they’re structured, governed and regulated, and in the types of plans their use is permitted. Industry experts explain why CITs are becoming so popular, how they are evaluated and used, and innovations ahead in investment strategy and usage.
Despite it being one of the most challenging times in the real estate markets, institutional investors can delve into segments and markets that continue to offer strong long-term risk-adjusted returns and an inflationary hedge. Structural shifts support specialized areas like logistics and delivery, some housing subsectors and secondary urban markets. Deep due diligence and boots on the ground are even more critical today, as shared by this experienced asset manager.
A supportive macroeconomic environment has enabled more corporate pension plans to derisk via pension risk transfer transactions, including lift-outs and full plan terminations, often structured as asset-in-kind transactions. Insurer capacity, flexibility and pricing is favorable, particularly for plan sponsors who can provide robust participant data. A well-planned participant communications strategy on the transfer goes a long way to achieving success.
A wide range of institutional investors across the public and private sectors are responding to sustainability as an investment approach in a variety of ways. As climate change and the transition to a net-zero economy are key themes that are driving many strategies focused on risk management and alpha opportunities, sustainability is evolving to incorporate biodiversity and social issues as well, and the data and metrics that support sustainable investment frameworks are becoming ever more sophisticated.
Private markets continue to attract asset owners for their high relative returns and diversification. They are seeing more recent impetus from customized approaches and alpha opportunities that access new technologies. While keeping an eye on potential macro impacts, asset managers remain optimistic these markets will continue to thrive. Across private equity, private credit and specialty finance, a manager’s experience and consistency are key.
This is an opportune time for asset owners to explore hedge fund strategies, as they can provide alpha and nondirectional returns to investment portfolios. Diversification and liquidity are top objectives served by approaches such as trend following, credit and systematic strategies. A bespoke model to hedge fund allocations helps target unique portfolio needs, while a partnership approach between investor and manager fosters deeper understanding on both sides.
With concerns swirling around central banks’ next moves on rates and the impacts on global growth, an active fixed-income strategy can help investors better navigate volatility and dispersion and identify current opportunities. Instead of lagging indicators like unemployment and corporate defaults, investors should focus on forward-looking signals like jobless claims and loan surveys. Delivering consistent returns and moving with conviction are key hallmarks for an active manager.
This could be a timely moment for investors to find income opportunities in emerging markets. Prudent fiscal and monetary policy are helping boost growth, the green energy transition is supporting demand, and healthy cash flows are delivering dividends. A dynamic, bottom-up approach toward high-growth, high cash flow EM companies can delivers an attractive risk-reward profile.
The DC plan industry is squarely focused on retirement income, with providers innovating on products and services and sponsors actively evaluating and implementing solutions for their plan participants. A spectrum of offerings, from systematic withdrawals and managed accounts to lifetime income embedded in TDFs, is now available. Record keeper capabilities and participant education and uptake are also top of mind for implementation.
Financial marketers struggling with traditional cookie-based consent systems and privacy-related regulations can now tap into marketing analytics systems that use intelligent data and attribution for an institutional investor audience. A specialist analytics firm discusses its data analytics platform for asset managers that can deliver the attribution and results they need.