Endgame objectives vital for setting investment strategy

Without a clear end game approach, Trustees are unable to plan for the correct investment strategy warns Hymans Robertson, as the latest update to the Excellence in Endgame insights hub is released. Trustees must have a clear understanding of their end-game approach, prior to choosing an investment strategy, to ensure the level of returns, risk and timescales align.

In its latest publication, the leading pensions and financial services consultancy, outlines the key considerations needed for each of the main endgame approaches - buy-out, run-on and flexible - when devising an investment strategy. Each endgame option should have a tailored investment strategy and all stakeholders should be aligned on this.

Commenting on the need for an investment strategy to take place once the endgame objective has been agreed, Ben Fox, Senior Investment Consultant, Hymans Robertson, says:

“Agreeing investment objectives is a key part of the endgame approach a firm chooses to adopt. However the investment strategy must follow on from the choice of endgame, and it is crucial that all stakeholders are on board and willing to work together once in place.

“For firms that want to buy-out, the focus is very much on investing in assets that drive insurer pricing and holding highly liquid assets. The closer a firm is to targeting buy-out, the greater the level of liquidity and pricing alignment needed.

“For those choosing to run-on, there is an opportunity to consider a wider range of asset classes, including illiquids. The level of illiquidity in your strategy should be guided by your objectives. However, risk management remains crucial.

“Ultimately an investment strategy can only take place once the end-game strategy has been decided, and all involved must work together to ensure the plan is in place. Our guide can help firms work through their decisions in a chronological manner, giving trustees the greatest chance of achieving their objectives.”

The Hymans Robertson Excellence in Endgames insights hub and decision-making tree can be found here.