In the latest episode of The Professional Investment Podcast, Mitesh Sheth, founder of OrgAlpha and ex-CEO of Redington, joins me to discuss this week’s FT asset management newsletter which focused issues with private credit and equity assets.
While market concerns about these asset classes are not new, it’s something that does not often get included in the debate about whether pension schemes should allocate to these asset classes.
Thinking about the change in the interest rate environment over the past few years, it’s surprising more companies have not struggled with higher debt costs.
Many have been able to roll forward that debt but that won’t happen forever. The environment has also changed in private equity with asset owners now wielding more power and wanting private equity lawyers to become less aggressive!
Asset owners and managers are changing the way they design portfolios with a move away from strategic asset allocation towards total portfolio allocation. This approach aims to make co-ordinated decisions based on the total portfolio’s risk and return objective.
This strategy makes more sense for many large professional investors managing pension scheme assets as they have a very clear set of objectives about what they want to achieve for their members.
We discuss how larger pension organisations are already thinking about how they can make their portfolios more dynamic to be nimble in the face of risks such as credit uncertainty or concentration risk in US equities.
We end the discussion reflecting on the implications of this fundamental change in portfolio design for asset managers and owners who are already dealing with two decades of rapid change.
Watch or listen now
