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Turning on the Christmas lights

Friday, December 6, 2013

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A passing thought of Christmas leads RisCura's Andrew Slater to think about what UK pension schemes can learn from further afield.

Those who know me know that I am a Grinch when it comes to Christmas. If mince pies and mulled wine were really that nice we would eat and drink them all year long!

But what the arrival of Christmas does mean is that on my latest trip to Heathrow the Economist's 'World in 2014' had hit the shelves. What one article says is: "Since 2001 Africa's GDP has expanded more quickly each year than the global average. In the past decade, only the bloc of developing Asian economies, led by China, has grown faster than Africa. ... This [lower commodity prices] means that inflation will drop below the rate of GDP growth by the end of 2014. Such a milestone will further Africa's claim to be a favourable destination for investment."

The article a couple of pages later is illuminating: "But in one broadly accepted assessment, the International Energy Agency estimates that an additional investment of $600bn would be needed by 2030 to provide all those who lack power with enough for an electric light, a fan and a mobile-phone charger." That there is a lot of catch-up to do to get electricity to all its 1 billion citizens and create a bright Africa is not in question, though it is catching up a rate of knots. What I find fascinating – and agree with wholeheartedly – is that a mobile-phone charger is now a life essential. A mobile phone is the key technology that enables leapfrogging and why today's frontier market has a robustness making it more than a simple re run of the emerging market story from 15 years ago. A question to accompany the groan-inducing joke in the Christmas cracker: which country leads the world in mobile commerce? The answer, according to one survey, is Kenya with its M-Pesa mobile money.

This trip was not to Africa this time, but to the US to discuss Africa with their endowments and pension plans. A couple of weeks ago I heard Amin Rajan of CREATE-Research launch his latest report, which is excellent and thought-provoking as ever. On innovation in asset management (across a broader range of institutional investors than just pension schemes) he made the observations that, with the exception of liability-driven investment (LDI), all innovations in investment in recent years have come from the US. I'm not sure I agree entirely with that – the world could learn much from how South Africa does defined contribution (DC) for example – but the US certainly leads more than it follows.

Back to Heathrow. British Airways may now advertise that it "flies to serve" but in my experience this year it has been, unfortunately, more the case that they never fail to disappoint. The flight to the US was two hours delayed, and there have been longer waits on the tarmac. Let's hope UK pension schemes are not similarly late in realising that their salvation does not lie close to home and it is time to travel further afield.

Written by Andrew Slater, managing director, RisCura