Money Management Letter - Consultants Expect More Activity In Alts, LDI

Consultants Expect More Activity In Alts, LDI

Every issue, MML poses reader questions to consultants. Is there something you're dying to ask? Let us know by contacting Anastasia Donde, managing editor, at (212) 224-3635 or adonde@iinews.com.

What are your predictions for the investment environment and asset allocation shifts in 2010?

Erik KnutzenErik Knutzen, cio, NEPC: We are close to finalizing our forecast for 2010 and predict that return expectations will be reduced following significant increases in 2009. We expect that we will see a lower growth environment in the next five to seven years and the recovery will be modest, which means reduced equity return expectations. On the fixed-income side, the current lower interest rate environment translates into more muted 5-7 year return expectations.

We are preparing our clients for asset allocation moves for this environment to not just seek additional returns from beta strategies but also consider less liquid strategies in exchange for higher returns. Less liquid private debt strategies that we are recommending include distressed, mezzanine, direct lending, secondaries and distressed real estate. Hedge funds can also be used on the alpha side. We are also recommending continued global diversification to gain exposure to economies or currencies that experience stronger growth, for example, the emerging markets. We are continuing to recommend building inflation hedging exposure. Some of our clients began to increase their exposure to real assets this year already.

Carl HessCarl Hess, global practice director, Watson Wyatt Investment Consulting: Although active management had a nice rebound, there is still a decent amount of disappointment with the proposition. I think more plans will choose to ...

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The Source for Money ManagerSearches and Industry Trends

Consultants Expect More Activity In Alts, LDI

The Source for Money Manager
Searches and Industry Trends