COVID-19 puts new opportunities and risks on the agenda - WPS panelists

The COVID-19 pandemic has changed the opportunity set and risks to which institutional investors are paying attention, with credit and potential bankruptcies high on the agenda.

One challenge has been finding the right combination of the "least-worst" performing asset classes, said Troy Rieck, CIO of the A$13 billion ($9.2 billion) LGIAsuper, Brisbane, Australia, on a panel discussion Friday at the Pensions & Investments WorldPensionSummit conference.

Mr. Rieck added that the super fund's executives do not try to second-guess forecasts related to political risks arising from elections or geopolitics when building the portfolio.

Executives are trying to build portfolios with a focus on credit rather than equity, he said.

Mr. Rieck added he is excited about infrastructure debt, real estate debt, regulatory capital arbitrage, high-yield and bank loans. "If it is credit-related, I want to own it," he said, adding that investors get "zero for cash and nothing for bonds."

Besides those assets, "there is not much out there we like," he said. It could be a challenging decade if inflation does turn up, he said.

Cheryl Alston, executive director and CIO of the $3.7 billion Dallas Employees' Retirement Fund, who appeared on the same panel, added that infrastructure and private equity investments linked to small and medium enterprises could emerge in the U.S. with better returns than what investors can find in other markets if a stimulus package targeting them is agreed to.

Other investors voiced concerns that the pandemic is not yet over. Speaking on a separate panel, Simon Frechet, CIO of retirement programs at Bruce Power Limited Partnership, Tiverton, Canada, said: "We have rebounded from the lows in March but there … is going to be a hangover."

There is a lot of debt in the system and there will be "many more bankruptcies," he said. "Until we have a vaccine …this is going to continue. ... That has me worried. ... Tail events are going to happen — it's not about if, it's about when," Mr. Frechet added.