Super funds need to “take a step back” in the current environment, however, there are a lot of opportunities for skilled managers, according to participants in a recent Watson Wyatt roundtable.

Five Watson Wyatt investment consultants from the UK, US and Australia, participated in the discussion, which aimed to provide guidance to large funds in the current crisis among credit and some other markets. Tim Unger, senior investment consultant in Sydney, said: “Only funds that have strong governance and the ability to think through potential outcomes should react at this time. The potential for regret – doing something that doesn’t turn out to be correct – is quite high right now.”

Alasdair Macdonald, a UK consultant, said: “[Funds should] acknowledge they are long-term investors and are doing things for strategic reasons. Acknowledge their mission is not to make tactical calls on markets, get out of equities just before they fall and then get back in again. They’re long-term investors holding risky assets. There will be times, like now, when the strategy is not beneficial.”

Mark Ruloff, from the US, said: “And the long-term strategies generally remain the same, however, these … should reflect the current market environment. Right now there is a decline in Treasury bond rates and a move up in corporate bond rates. So, plans that are de-risking and moving more into bonds might decide to accelerate the move into corporate bonds but slow down the move into Treasuries and wait for better opportunities. This especially makes sense in the US…”

Margaret Frost, research manager in London, said: “It’s also a good time to look for opportunities. What’s happened in the market is a liquidity event and a credit event. Because of the crisis, good bonds are being thrown out with bad credit. There is a lot of opportunity for skilled managers to do well. However, it’s important for trustees to react, but not overreact.”

Matt Stroud, investment consulting practice leader in New York, said: “We’re seeing sponsors trying to use this environment to their advantage. They’re expanding or enhancing their understanding of how all of these things are linked and how the dynamics of the economy relate to the plan assets for which they’re responsible. So, one healthy response, regardless of governance level, is to better understand risk resident within the economy. Learn how those risks might present themselves in a way that matters to the plan.”