There is an old saying in the investment world that “Diversification is the only free lunch in investing”. For every quote about the benefits of diversification, there is another about diworsification – the process where investment outcomes are made worse in an attempt to diversify, either increasing the risks, or increasing the risks and reducing the returns at the same time.
The idea of not having all your eggs in one basket is a no-brainer. On the other hand, having one egg in one basket doesn’t sound particularly safe either. Can you imagine driving home with one egg in each basket, with 100 of them rolling around in the back of your car?
Given this conundrum, it’s not surprising that many institutional investors such as pension schemes have made used of a low-governance investment product called Diversified Growth Funds, DGFs, to effectively delegate the job of diversification to investment managers to resolve. The promise of a return of “cash + 4% p.a.” or “equity-like returns with half the volatility” sounded like just what everyone needed. But how would you know that, in delegating the job to someone else, they are delivering on their promise and not dropping your eggs? How do you even know if their promise is what you need?
If you’re faced with such an important task, you’re invited to our Investment Breakfast Seminar on 4 July to delve into this specific topic. Joining us is keynote speaker Fred Berry from The Pensions Regulator to share his views and insight on investment risks, governance, and transparency.
Come and find out answers to some of the key questions, such as:
- With pension schemes focused on overall journey planning, should volatility be controlled locally (at the asset class level) or globally (looking at the overall scheme level)?
- If they don’t want all eggs in one basket, how should pension scheme trustees seek out a diversification strategy that also fits with their other objectives?
- Do you need to re-define your agreement with your investment managers?
For more details, and to reserve your place, go to our registration page.
I look forward to seeing familiar clients and new faces at our Investment Breakfast Seminar to find the answers to these important questions.