"We all hate (it) because I think that low inflationary environments are, generally speaking, better for prosperity. We would like to see stable inflation going forward, both because it's good for society and frankly, then we've got a better handle on our liabilities."
To ensure an appropriate mix of risks within the pension fund to hedge against inflation and real interest rates, the fund has exposure to growth assets to tap the prospects of higher returns in equities, which has been less expensive than using government bonds for hedging, he said.
The fund has also looked into private debt, real estate and infrastructure, and the wider equities market that can give it longer term correlation with inflation than a passive portfolio that tracks an index, he said.
"There's a perception that investing in an index is low risk. It's only low risk if you define risk by reference to that particular index. It's a completely self-defeating argument. Ultimately, we have to pay pensions, and therefore (we have to consider), are there ways of investing in equities that are better tailored to the needs of our scheme?" Pilcher said.
"We're actually developing an in-house long-term real return equities strategy that we think will give us long-term links to inflation, growth, higher returns, and that we can thus meet the needs of our members better by doing that," he said.
Bryan Lewis, vice president and chief investment officer at U.S. Steel, said during the same panel that the team has found opportunity in clean energy infrastructure domestically, where in the past infrastructure as an asset class was more appealing in developing markets.
"I think for many years, investors knew that there was a sense of meaning for investing in America's local and aging infrastructure and the need to put capital to work there," Lewis said.
As with many other corporate plans in the U.S., his firm's retirement plan is frozen but is fully funded, which allows for a lower target return of 6.5% to 6.9% he said.
"What this recent market has done is given us an opportunity to think about going from a traditional (liability-driven investment) mapping approach to what I call more of a portfolio stabilization and growth model. And what that means in my mind, is the stabilization is 60% to 65% of our portfolio remains invested in fixed income and very predictable securities. However, we are linking them to variable rate opportunities and investing shorter on the curve due to the inversion of short-term yield versus long-term yield," he said.
Joseph Cavatoni, market strategist and principal chief executive officer of funds at the World Gold Council, said on the panel that gold serves as a strategic asset that can provide long-term returns and absorb shocks to the portfolio.
"When you think about diversification, and the world is volatile, and forever changing, think about the asset allocation in a vulnerable way. Don't just think it has to be there short term and it's gone," he said.