Difficult economic times oblige long-term investors, such as pension funds, to think carefully about whether they make changes to their asset strategies or simply "hold on" through the turbulence. The answer lies in their ability to find a balance between investing with a long-term perspective and making and implementing decisions quickly, and the extent to which they are successful will depend on their governance arrangements.
While we see a number of interesting opportunities emerging from the liquidity crisis in recent months, we do not believe that immediate changes to pension funds' investment strategies are required. Rather, now is the time to consider a number of options so they are prepared to take quick and appropriate action in the future. In addition, pension funds should be realigning investment strategies to match their governance arrangements, having accepted that efficiency is forfeited and value destroyed if they remain out of kilter. This is also supported by a growing body of research* showing a clear link between superior performance and strong governance, particularly among larger funds.
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