Funds Hub

Money managers under the microscope

What’s best for you: UK plc or Macdonald’s?

May 10, 2010

Pension schemes have retrenched in the wake of the global crisis.

To put it in more delicately:  it is a universally acknowledged truth that a pension fund in deficit must be in want of a sustainable  source of returns to bridge the funding gap, at moderate risks.

For some the solution has been to change investment strategy, but not necessarily at the expense of equity. In fact, for some the shift has been within an already existing fixed income portfolio, from UK gilts — a popular choice in the post-Lehman days — to corporate bonds, a senior fund manager tells me. Nice work if you can get it — this could be what some investors are saying now,  especially if they are UK/euro zone sovereign debt holders.

“The inflation of the corporate balance sheets is moving to the government. So if you could get out of the governments and get into the corporate just before the government situation deteriorated with the peripheral euro countries you could have done very well,” the manager tells me.

“One question we posed to investors: whose credit is better, Macdonald’s or the British government’s?,” the manager told me. With hindsight and strictly in terms of  certainty of cash flow and sustainability,  could going Macdonald’s makes sense?

“It is the new path, the way forward in the deficit-busting battle,” I will tell myself next time I walk past one.

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