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Focus on stable investments: Towers Watson
The industry needs to move beyond diversification and invest in more durable and structurally sound investment products to avoid risk, according to Towers Watson head of investments, Graeme Miller.
Speaking at an Australian Institute of Superannuation Trustees lunch in Melbourne, Miller said the industry could not rely on diversification alone to survive uncertain markets, but needed to focus their investment on products that could sustain themselves through several market cycles.
“In our view, many investment propositions simply do not stack up when subjected to stressed environments,” Miller said.
Investors have to assume that when they invest over the long term, their assets are capable of going through two or even three market cycles, he said.
Investors and super funds needed to investigate whether the capital structures of their assets were sound enough to withstand stress, how investors would behave in those times, how debt would be retired, and what incentives managers would be given in times of stress, Miller said.
Miller encouraged the super fund delegates to analyse the structures they had in place to make and implement investment decisions.
“The long-term winners in investment are those that take the time, the effort and the hard work to set themselves up to make better investment decisions,” he said.
In a question and answer session, Miller told the audience Tower Watson was resisting making short-term tactical moves to profit from unpredictable market dynamics, and was rather making sure that the time frame over which investment decisions were made was appropriate.
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