“Having low-volatility strategies frees up some of the risk budget,” White said. One of the lessons of the financial crisis for super funds was that what had been regarded as defensive assets did not provide the protection that was required. The report also reckoned investors be wary of market capitalisation benchmarks because they were prone to asset price bubbles, biased to past success and carried excessive concentration risks. Mercer IC regarded the finding about past successes the most alarming because it inferred that investors benchmarked against these indexes would have about 90 per cent of their global equity assets in companies and markets which were thereby expected to grow relatively slowly over the longer term. To avoid concentration risk and mitigate future asset price bubbles, Mercer IC advised investors to set fixed weight exposures to market sectors and regularly rebalance to these targeted weightings.

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