Pension funds may be inadvertently encouraging managers to misallocate capital for short-term gains rather than focus on the long-term goals of the plans. Speaking at the annual investment conference of the National Association of Pension Funds, Sir Graeme Davies of the Marathon Club, reports Global Pensions, says the misallocation comes partly because pension funds offer three-year mandates to managers and hold beauty parades, both of which can cloud a manager’s choices of investments in order to produce more impressive short-term returns. Davies warned that pension plans performance “comes in waves,” so there will be periods when their managers will not perform well.
