« Having low expected return in the perspective induced us to move in a different direction, out of the traditional thinking of equity-bond-cash, and over-underweight, into other investment strategies. »

« Having low expected return in the perspective induced us to move in a different direction, out of the traditional thinking of equity-bond-cash, and over-underweight, into other investment strategies. »

« Having low expected return in the perspective induced us to move in a different direction, out of the traditional thinking of equity-bond-cash, and over-underweight, into other investment strategies. »

 

Moving to the next part of the program, moderator Dearnell introduced Monica Defend to explore what ageing population imply for government policies.

Ms. Defend said that policymakers usually focus on the costs associated with ageing populations, rather than the benefits. Some countries, such as the Nordics, have been trying to increase the labour force participation rate to make it easier for people to keep their jobs as they age. Others increase the retirement age. Another option is to adjust the public-sector budget, cutting expenses or increasing taxes to cover the costs related to healthcare and pensions. Other solutions are freer migration or private pensions, but both can be controversial.

Ageing populations have already had a strong impact on economies. These include debt accumulation and debt sustainability, productivity, and demographics. We look at demographics because it is related to productivity, explained Ms. Defend. There will be a shortage of workers in almost all countries, so we will have less beta, higher taxes, and less incentive for companies to invest. This will result in lower productivity, which will affect potential and long-term growth.

Expecting low returns induced Amundi to move in a different direction, focusing on assets, she continued. The first step was to move beyond traditional asset classes and look at credit continuum to get the liquidity profile and risk premium across the fixed income line, as well as emerging markets and other asset classes.

These can include Illiquid assets because they tend to have a negative correlation, helping diversification. They also pay a premium; real estate, for example, is paying 5%. Amundi is also  looking at thematic investment, finding trends that will be structural, such as the growth of the middle class in China and India. Moving out of traditional thinking helps identify investment areas that have a strong economic foundation, Ms. Defend emphasized.