Short-term liquidity management is becoming increasingly important to long-term investing, delegates heard at the Asian Investment Summit on Wednesday, on the second day of AsianInvestor Week in Hong Kong.
Among those banging that drum was panel speaker Prakash Kannan, head of total portfolio management, economics and investment strategy at GIC, the $100 billion-plus sovereign wealth fund of Singapore, who described the volatile market environment as “quite challenging” for value investors.
In general, it is important to differentiate between investment horizons.
In his opening presentation at the summit, Jim McDonald, chief investment strategist of Northern Trust, identified two distinct perspectives: a strategic outlook, normally out to five years, and a tactical outlook covering 12 months.
Hawker concurred, noting how an investor’s tolerance for things going wrong in the short term is often determined by their investment horizon. For example, sometimes insurers are forced to sell assets at the wrong time in order to meet solvency requirements, he said.
Managing the risks is often a fluid task with imperfect results.
Using models and historical data, we can make assumptions about what might happen. “[We] are not trying to get one answer, but just to have multi[ple] scenarios,” Matthew van der Weide, vice president, portfolio and quantitative analytics, FactSet, said at the same panel.
But even then that only deals with the known unknowns.