Former pensions minister and peer of the House of Lords, Baroness Ros Altmann is a well-known economist and campaigner. Her work has included leading a lobby that secured millions of pounds in compensation for the retirees of the UK’s former nationalised steel industry, who faced losing their entire state pensions.

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Speaking at the World Pensions Council’s virtual conference, the G7 Pensions Investment Summit, Altmann said that pension funds must rethink their allocations in the face of quantitative easing and increased liabilities.

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“Markets have become hooked on exceptional monetary methadone,” said Altmann. “Modern methods of central bank monetary policy, the experiments that we’re in the middle of, which were meant to be temporary, have gone on for more than 10 years.”

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Quantitative easing was first used in the UK in 2009 when the global financial crisis was threatening the country’s economy, with unemployment rates rising and stock markets plummeting.

The Bank of England’s first programme of quantitative easing injected GBP75 billion into the economy – a figure that has since risen to GBP745 billion.

At the same time, long-term interest rates have been “artificially depressed”, increasing the liabilities for pension funds, as they typically rely on bonds.

Sovereign debt also provides the risk-free rate against which other assets are priced, as they offer low risk and also low returns. “Over the last four years it is jaw-dropping to see the extent of negative yields.

It is starting to look more like return-free risk, than risk-free return,” noted Altmann. As of July, more than half of British government bonds carried negative yields, a debt pile totalling GBP1.33 trillion pounds, according to data from Tradeweb.

Read more @Institucional Asset Manager