More investment products need to be developed that actually achieve an absolute return, according to Jeffrey Sargent from bond specialist asset manager Pimco.
The executive vice-president Pimco Europe told the Irish Funds Industry Association earlier this week during a CEO roundtable that, prior to the financial crisis, much of the product available had been traditional benchmark-based investments – where asset managers would try to produce alpha in excess of whatever the benchmark was.
He said: “Unfortunately, over an extended period of time, not only [did] benchmarks produce negative returns but often the alpha component [of the fund] was also producing negative returns.
“So this has created a great deal of fear and risk aversion in the marketplace and caused investors to rethink [whether] they have the tolerance for the type of volatility and extended period of below-expectation returns to get through a crisis-style event.
“We have then seen much broader...