The list of investment challenges for pension funds just got bigger due to the Trump administration’s increased micromanagement of the US economy. Besides structural challenges such as aging populations, unfavourable government debt dynamics and climate risk, increased macroeconomic uncertainty challenges the investment thesis for pension fund investors. The politicisation of financial institutions, such as the Fed and fiscal dominance are likely to result in a weaker US dollar, stickier inflation and structurally higher interest rates.

We will discuss the profound consequences on both private and public asset markets via the impact on valuation, liquidity, leverage and portfolio diversification. There is a new paradigm emerging that sees the traditional investment thesis centred around asset classes beating benchmarks increasingly replaced by a risk factor-focused approach targeting a certain overall investment outcome relevant to end investors. We will discuss how best to approach this new paradigm.