International Diversification for Pensions and Sovereign Funds

As Africa continues to recover from the pandemic, it faces the challenges of a slow global economy, global inflation, elevated borrowing costs, and a cost-of-living crisis. In many instances, inflation remains elevated, borrowing costs are still high, exchange-rate pressures endure, and there are ongoing concerns about political stability. For asset owners with long planning horizons and multi-decade liabilities, this environment presents too many open-ended and unknowable risks. The immediate one is how to enhance investment performance and mitigate portfolio risk to be able to deliver preferred retirement outcomes.

International diversification can reduce volatility, minimise risks and possibly improve investment returns of pensions and lifetime portfolios. For pension and lifetime funds across Africa, this represents an allocation opportunity since they are faced with additional country-specific risks such as economic, political, local market and currency.

The questions

• What is the optimum asset allocation between domestic and international asset classes?
• How can pension and lifetime funds identify foreign markets that could benefit their portfolio dynamics?
• What asset classes are delivering cross-border return premiums?
• What are the most appropriate ways of externalising assets across jurisdictions?
• How can institutional investors estimate the real benefits of their exposure to cross-border asset classes?

International Diversification is a learning and implementation program helping pension and lifetime funds identify markets and asset classes where they could benefit the most. The programme also gives pension and lifetime funds access to leading intermediaries who are already helping their peers implement their international diversification and allocation strategy.