Home Rising from the Crisis: Investment Lessons Learnt

Rising from the Crisis: Investment Lessons Learnt

Press Release: December 21, 2009

Interview with: Jaap Maassen, Senior Vice President International, APG and Vice Chairman, European Federation for Retirement Provision(EFRP)

Montreux, Switzerland, December 18, 2009 - FOR IMMEDIATE RELEASE

Two years ago, many investors across the world were on a joyride that turned into a nightmare, leaving behind injuries and bleeding portfolios. Fortunately many valuable lessons emerged from these mistakes, but the survivors of the financial crisis will be those who do not easily forget the past and slip back into old habits that leave the financial industry susceptible to further wounds. Jaap Maassen, SVP International APG and Vice Chairman at EFRP, a speaker at the marcus evans EPI Summit 2010 taking place in Montreux in Switzerland 10 - 12 May, shares his thoughts on the challenges facing todays Chief Investment Officer, the lessons learnt from the crisis and his outlook for the next few years.

What are some of the challenges facing investment executives in Europe at the moment?

Jaap Maassen: The biggest challenge for the investment industry right now is understanding the products they are selling. The reason why this crisis occurred was that very few investment executives working in large banks and insurance companies had any clue what they were buying or selling. This was the first lesson investors learnt in the past 12 to 18 months. With mortgage backed securities in the United States for example, very few investment managers knew that if the value of the mortgage exceeds the value of the house you could just go to the bank, hand over the house keys and walk away. In Europe however, you have to continue paying the mortgage.

The second challenge is regaining client confidence, as banks and insurance companies have failed many investors. They need to provide a lot more transparency, and clarify the costs and benefits of their products to their clients. Investment executives should also show a much higher moral standard. It is unacceptable that at the Dutch-Belgian bank Fortis which lost 90 per cent of its value, executives got away with large bonuses while institutional investors such as pension funds were left with the pieces so to speak. For every 100 million bought in equities, only 10 or 20 per cent is left now. I do not necessarily favour capping bonuses, but I do believe in the slogan, We rich, they rich. If they make good money for us, they should also benefit. But it cannot be like in the past one and a half years, where there was no relationship between how well we did and how well they did.

What are your thoughts on the regulatory environment in Europe?

Jaap Maassen: We should be very careful that we do not over-regulate. At the end of the day, institutional investors are professionals, and as far as regulations are concerned, the most important thing is transparency about cost, benefits and risks. I really believe that a straight copying of the Solvency 2 directive for the insurance industry and pension funds will be absolutely disastrous. Pension fund contracts generally tend to be far more complex with more conditions than insurance contracts.

Should investors revise some of their investment strategies?

Jaap Maassen: Investors do not need to change their investment strategies, but they should understand the risks and benefits of their investments, as that is the most important thing.
Rabobank in the Netherlands was one of the few large banks in the Netherlands who really understood the risks they were taking on. Their pension fund actually covered itself for the event of a simultaneous drop in interest rates and equities. Usually when interest rates drop, equities rise and vice versa. But there is also a probability they will not. They are still one of the most robust pension funds in the world as a result of that. It is not so much a matter of changing you risk strategy but more a question of understanding your risk.

What long-term strategies would you recommend to investors in Europe?

Jaap Maassen: Spreading your risk, which is something we have been doing for many years. In the long run, equities will outperform government bonds and fixed income, but I do not necessarily think that we need to change our long-term investment strategies. As price earning ratios are still relatively low, we should be careful not to suddenly become over prudent and change our strategies, and distribution of fixed income and real asset investments. I still believe that we should significantly invest in equities. Last year we saw some investment funds and pension funds rebalance significantly in favour of fixed income, but that was not a very healthy position. We have seen a strong rebound of equities over the last six months. I would recommend being careful with rebalancing towards fixed income.

What are your projections for 2010?

Jaap Maassen: I am a bull by nature, so I remain optimistic. But I am worried about the unemployment situation which I hope changes to the better. I am optimistic about the future. In many ways, this financial crisis (and we are now on our way to recovery) has been a solitary one in the sense that in many ways we have actually learnt our lessons and should in the future be far more careful and prudent in taking certain risks on our books and understanding the risks taken. People will probably now sell less complicated products and if they sell complicated products, know what they are talking about.

Contact: Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division

Tel: + 357 22 849 313
Email: press@marcusevanscy.com

About the European Pensions & Investments Summit 2010

This unique forum will take place at the Fairmont Le Montreux Palace, Montreux, Switzerland, 10 - 12 May, 2010. The summit programme consists of a range of interactive platforms and case studies focused on asset management, emerging regulations and risk management. The summit format is neatly balanced by many networking opportunities over coffee breaks, cocktails and gala dinners. The event further offers an exceptional opportunity for private and customised meetings with best-in-class service providers.

For more information please send an email to info@marcusevanscy.com or visit the event website at http://www.epi-summit.com/JaapMaassenInterview.

Please note that the summit is a closed business event and the number of participants strictly limited.

About marcus evans Summits

marcus evans Summits are high level business forums for the worlds leading decision-makers to meet, learn and discuss strategies and solutions. Held at exclusive locations around the world, these events provide attendees with a unique opportunity to individually tailor their schedules of keynote presentations, think tanks, seminars and one-to-one business meetings. For more information, please visit http://www.marcusevans.com.

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Notes to editors

For more information, please contact:

Sarin Kouyoumdjian-GurunlianSarin Kouyoumdjian-Gurunlian

Tel: 44 203 002 300244 203 002 3002

Email: press@marcusevanscy.compress@marcusevanscy.com

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