Key Takeaways
- • Klaas Knot, a leading candidate for ECB president, described the current environment as "a world of poly crisis," citing Middle East conflict, US-China rivalry and cybersecurity risks as concerns for institutional investors at the Pensions & Investments WorldPensionSummit in The Hague on Nov. 4.
- • Knot warned that private credit has so far been a "fair weather asset" and that the industry lacks experience with distressed debt and workout procedures if the credit cycle turns.
- • L&G Asset Management's Christopher Jeffery (£1.2 billion / $1.6 billion L&G Asset Management) said inflation compounding over time is underestimated by investors and can weaken bond-equity diversification precisely when pensioners need real purchasing power protected.
- • AP3, the SEK 891 billion ($91 billion) Swedish pension fund, is pursuing a total portfolio approach with accountability measures, including removing portfolio managers who underperform sufficiently or for a long period.
- • APG, with €639 billion ($715 billion) in AUM, deployed a "DPM Samuel" AI digital portfolio manager tool built on internal data to run deeper scenario analysis for its real estate team.
Summary
Speaking on day one of the Pensions & Investments WorldPensionSummit in The Hague on Nov. 4, Klaas Knot, a leading candidate to become the next president of the European Central Bank and former president of De Nederlandsche Bank from 2011 to 2025, focused his keynote on macroeconomic and geopolitical risks. He identified conflict in the Middle East, the rivalry between the United States and China, and cybersecurity challenges as issues facing institutional investors. "I think it is fair to say that we're living in a world of poly crisis," Knot said, adding that it is difficult to identify assets that would escape the consequences of these crises and vulnerabilities.
Knot also described private credit as a potential area of trouble, calling it a "fair weather asset" that has so far only experienced an upturn in the credit cycle. He noted the industry has no experience with distressed debt or workout procedures comparable to those in the banking sector.
Christopher Jeffery, chief investment strategist for Europe at L&G Asset Management, which has £1.2 billion ($1.6 billion) in assets, said realized volatility has not shown a significant increase in recent years despite high-profile events. He singled out inflation as a risk that cannot be dismissed, warning that investors underestimate its compounding impact and that it can reduce the effectiveness of diversification. "The correlation between equities and bonds are most positive during the period in which arguably it is most needed to preserve the real purchasing power of pensioners' assets," Jeffery said.
At panel discussions, pension leaders addressed how new tools and governance can improve decision-making. AP3 head of asset management and CIO Jonas Thulin said the SEK 891 billion ($91 billion) Swedish fund has made accountability central to its shift to a total portfolio approach. Measures include transparency, such as an office video board showing investment team members' trading books, and a willingness to replace strategies or managers. "If you underperform sufficiently or for a long period of time, we get rid of that PM," Thulin said.
APG, which manages €639 billion ($715 billion) and serves as in-house manager for the €533 billion Stichting Pensioenfonds ABP, has deployed a tool called "DPM Samuel," short for digital portfolio manager. According to Huib Vaessen, head of global research and analytics for real assets at APG, the tool is built on internal data such as historical investment decisions and underwriting standards, enabling deeper scenario analysis for the real estate team. Vaessen said manually adjusting underwriting assumptions across 60 real estate portfolio managers would be impractical, and that the AI-generated starting point yields more consistent investment proposals.
Knot also described private credit as a potential area of trouble, calling it a "fair weather asset" that has so far only experienced an upturn in the credit cycle. He noted the industry has no experience with distressed debt or workout procedures comparable to those in the banking sector.
Christopher Jeffery, chief investment strategist for Europe at L&G Asset Management, which has £1.2 billion ($1.6 billion) in assets, said realized volatility has not shown a significant increase in recent years despite high-profile events. He singled out inflation as a risk that cannot be dismissed, warning that investors underestimate its compounding impact and that it can reduce the effectiveness of diversification. "The correlation between equities and bonds are most positive during the period in which arguably it is most needed to preserve the real purchasing power of pensioners' assets," Jeffery said.
At panel discussions, pension leaders addressed how new tools and governance can improve decision-making. AP3 head of asset management and CIO Jonas Thulin said the SEK 891 billion ($91 billion) Swedish fund has made accountability central to its shift to a total portfolio approach. Measures include transparency, such as an office video board showing investment team members' trading books, and a willingness to replace strategies or managers. "If you underperform sufficiently or for a long period of time, we get rid of that PM," Thulin said.
APG, which manages €639 billion ($715 billion) and serves as in-house manager for the €533 billion Stichting Pensioenfonds ABP, has deployed a tool called "DPM Samuel," short for digital portfolio manager. According to Huib Vaessen, head of global research and analytics for real assets at APG, the tool is built on internal data such as historical investment decisions and underwriting standards, enabling deeper scenario analysis for the real estate team. Vaessen said manually adjusting underwriting assumptions across 60 real estate portfolio managers would be impractical, and that the AI-generated starting point yields more consistent investment proposals.
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