Staff
As the global financial crisis continues to create volatility in investment markets, institutional investors need to keep a number of “new realities” in mind as they plan their strategy for 2011, according to Mercer in New York.
“Although economic and financial confidence is tentatively returning to some Western countries, the crisis has wreaked havoc on a number of nations’ balance sheets, has disrupted the credit allocation process in Western economies, and added to the potential for global tensions,” according to Andrew Kirton, global chief investment officer with Mercer.
Following are the new realities that Mercer suggests employers consider:
- The status of sovereign debt as a safe haven investment has been put into question.
- Major developing economies, such as China and India, are growing in economic strength and have expanded capital markets access, creating a two-speed world economy.
- Inflation is a growing concern, with the prices of many commodities rising to levels not typically found at the start of an economic cycle.
- Reform of the financial system to avoid a repeat of the bailouts of 2008 is barely off the drawing board, and permanent fixes to tame the bump and grind of the world’s financial plate tectonics remain in their infancy.
- To achieve true diversification, investors must broaden their horizons. Investors will be challenged to design portfolios that are forward-looking in nature and not biased to past successes.