Some risks can be controlled. Some are blindside shocks. Last month, superannuation fund executives gathered in Melbourne to discuss how the varying risks threatening their businesses can be managed.
A greater recession Nick Bullman is a bear. A big bear. But one who wears exquisite gold cufflinks with French cuffs and a bespoke double-breasted suit. “All the data coming out of the major economies including China and India are trending down,” said the founder of CheckRisk, which analyses economic and financial market data. “We’re entering a recession that has the potential to be deep,” he said. “I fully expect quantitative easing three and four. The central banks will print money until there are no trees left.”
Bullman, a former hedge fund manager and equity trader with Goldman Sachs, said financial markets are in a non-discerning frame of mind. “Markets are treating everything the same,” said Bullman, whose small company is based in Bath, England. He’s not surprised by recent market volatility. “Markets will continue to spiral downwards until we’re paid to take risk,” he said. “You better be in very liquid assets. Agricultural commodities, gold are among the best places to put your money.” He said markets may never again perform in the way they have in the last three decades. “The period of 30 years of stable returns where risk was mitigated are over,” said Bullman. “Pension funds will have to move to a much more dynamic asset allocation.”
Staying afloat The severe flooding in Queensland last January was a state-wide natural disaster. It affected 60 per cent of the population. Among the businesses impacted were superannuation funds headquartered in Brisbane. As floodwaters increased the volume of the Wivenhoe Dam rise from 16 per cent to 175 per cent of capacity, panic levels among some employees at the Milton office of BUSS(Q) shot up just as fast. “It was important to tell the panic merchants to go home,” David O’Sullivan, CEO of the $1.5 billion fund, said. These people were given the following message: “Please go home. You’re not useful.” The cooler heads at the fund tried to remember where its disaster recovery plan (DRP) was filed. Once it was retrieved, senior staff decided which parts of it would apply flooding to their situation. This is typical, according to Daniel Shields of RiskLogic, who said a DRP should never be an instruction manual because each disaster has a different nature. It is a guide or “roadmap” to dealing with emergencies. ‘