The National Strategic Investment Dialogue, 2004
The 2004 National Strategic Investment Dialogue (NSID), a series of three separate day-long discussions held across the country, brought together selected groups of the top fiduciaries and leaders of the investment community to examine and debate the gap between common investment return expectations based upon historical averages and reasonable estimates of future returns given today's circumstances.
The Investment Paradigm Shift:
Why Future Investment Plans Should Not Assume Historical Investment Returns
Among the most serious concerns of those responsible for managing and ensuring the growth of investment portfolios is the significant disconnect between the rosy expectations of future investment returns, based on extrapolation of past performance, and the much lower returns available from today's market opportunities. Indeed, for senior corporate, public fund, foundation and endowment executives, this concern takes three forms that are different but are perhaps equal challenges. The first is coming to grips with the reality that the returns provided by investment markets during the past half century will not likely be reproducible during the years ahead. Understanding how to estimate future returns and why reasonable estimates looking forward are well below long-term historical averages is essential to developing new strategies that are likely to produce the best possible results. The second challenge for pension fund fiduciaries is managing the higher funding requirements implied by lower investment returns. University endowments face a similar challenge as they assess how lower returns will impact operating budgets. A third challenge is helping to shape expectations among management, boards and others so that they are driven less by past experiences that may no longer be reproducible and are more in line with what is likely to be possible during the foreseeable future. Together, these challenges place unprecedented demands on fiduciaries.
The 2004 NSID sessions were held in Washington, DC, Chicago, and San Francisco. Invited speakers and participants were hand-selected from the ranks of insightful pension plan, endowment, and foundation sponsors, including investment officers from some of the largest college endowments, Fortune 500 firms, as well as representatives from the nation's largest public plans and some of the industry's most forward-thinking money managers. The sessions featured speakers invited for their expertise and experience with the topics. Each group represented a spectrum of institutional investors, with invitees from all types of institutions and with varied perspectives on the issues. At the same time, each session was limited in size to facilitate informal dialogue and allow for greater depth of discussion. The NSID included individuals from institutional money managers, pension funds and other organizations managing institutional funds totaling more than one trillion dollars of institutional assets.
