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Timo Löyttyniemi’s presentation in Capital Markets Top Seminar 25.9.2014.
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Is Pension Investing Long-Term
Investing?
Managing Director
Timo Löyttyniemi
The State Pension Fund
Capital Markets Top Seminar
25.9.2014
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Aftermath of the Financial Crisis
To avoid another financial crisis
Sustainability of the financial and banking markets
Increased regulation, solvency and capital buffers
Increased crisis prepareness
2
Over 15.000 billion USD (US) lost in the
USA due to 2008-2009 crisis
Agendas for Promoting Long-Term
Perspective
4
• SME financing
• Infrastructure financing
• Anti-banking
• Anti-stock exchange
• Anti-speculation
• Anti-capitalism
• Systemic failure
• Economic growth
• Financial stability
• Shareholder value
• Long-term returns
Infrastructure Investments for Long-
Term
5
Motivation for Governments Motivation for Investors
Challenging debt levels
Infrastructure needs
Transfering investment
value to yearly payments
Enhanced efficiency and
speed of implementation
Stable income stream
Government related
risk
6
Characteristics of a Long-Term
Investor
Long-term perspective (LT liabilities)
More ”risky” asset classes and assets
More ”illiquid” assets
More ”real” assets
Ability to buy low and in crises
No forced selling
Avoiding human misbehaving
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An Example of Investment Horizon
- The State Pension Fund
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Asset Class Pension Investor
Level Horizon
Fund Level
Horizon
Fixed Income 1 year 1 year
Equities 5 years 2 years
Illiquid Alternatives 10 years 3-10 years
Time periods are based on average turnover for each asset class.
Conclusions
Pension funds have
long-term liabilities
Regulation, solvency,
governance, media,
short-term targets,
human behaviour
challenge long-termism
Pension funds have a
mixture of short-term and
long-term strategies
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