1.07.2017 21

Amundi Pension Funds Letter n°2

Published July 1, 2017

> 10 minutes

> 10 minutes


Investors on both sides of the Atlantic, having been preoccupied for several months, now have clarity on several fronts. The general perception is one of political risks having lifted; and we also note that the European economy is accelerating convincingly. But now certain underlying issues are returning to the forefront, impacting the management of Pension Funds assets in both tactical terms, and strategically.

So we see two over-arching themes return to the forefront for long-term investors : on the one hand, a normalized policy mix, and on the other a return to managing market risk. This return to fundamentals is logically reflected in the orientations of pension fund managers, or in the underlying portfolios, regarding monetary policies, asset performance drivers, and risk-free rates, among other factors. 

First of all, the macro-economic and financial environment. A key feature of how markets evolve, particularly when driven by monetary policies, is price movements –whether inflation or deflation are occurring. Both have consequences in terms of capital preservation or future income. Over the last few months a certain number of new elements have appeared, showing not only the current inflation rates, but also improving expectations. These are already causing the Fed to react, and later the ECB, followed by the bond markets both in terms of interest rate levels, and the shape of the yield curve. 

Then, portfolio construction.Against a back-drop of creativity in monetary policies having run their course - but also, in some countries, of these policies beginning to have an effect, the notion of a « risk-free rate » is again becoming crucial for CIOs and trustees in charge of strategic asset allocations. And in some cases also for the modeling out of expected returns. As risk free becomes risky…. 
And finally, market tendencies:US rate expectations down, perception still seems to be ‘enough growth, benign inflation’ good for stocks, as measured by technical factors. Taking into account the current position in the equity cycle the call is clearly in favor of positive contribution of dividends to return. 

And one must not forget the legal and regulatory framework within which Pension Funds must operate, for example in Germany: this brings us to an update on the Contractual Trust Agreement (CTA) structure. From the corporation’s standpoint, but also as viewed by employees, at a time when many «investment cases» are coming up, often involving cross-border European M&A. 
All we have covered above allows us to better take into account the pension funds’ decision-making parameters, including both constraints and portfolio management objectives, in a still-unusual context regarding rates and the valuations vs volatility tradeoff in equities.


To find out more, download the full letter


This website is solely for informational purposes.
This website does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or any other product or service. Any securities, products, or services referenced may not be registered for sale with the relevant authority in your jurisdiction and may not be regulated or supervised by any governmental or similar authority in your jurisdiction.
Furthermore, nothing in this website is intended to provide tax, legal, or investment advice and nothing in this website should be construed as a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or transaction. There is no guarantee that any targeted performance or forecast will be achieved.

Get in touch with us

Our online help service is available to answer your question

My personal information

If you have a question about our company or one of our products, please complete the form to get in touch. Please do not mention your account numbers or critical data in this form.


(*) Required fields
All our job offers (Permanent and temporary position, Internship, Apprenticeship or VIE) are available on our dedicated website:

Register and apply directly online.

Amundi on Twitter