Pension guru calls for dividend-investing strategies

April 18, 2013

Pension executives seeking to match their plans’ assets to their liabilities might be better off investing in dividend-paying stocks instead of fixed-income securities because interest rates are expected to rise in the near to intermediate term, reports leading US trade publication Pensions & Investments.

According to the industry experts quoted in the story, the fear of volatility that drove pension fund executives to risk-reducing strategies of bonds now threatens to put them at risk when interest rates rise.

“If (investors) want to buy payment certainty they have to pay the market price for it,” Keith Ambachtsheer, president of KPA Advisory Services, a Toronto-based pension management consulting firm, and director of the Rotman International Centre for Pension Management, University of Toronto, told P&I.

Ambachtsheer questioned whether the price of long-term payment certainty from fixed income has become so expensive to make it attractive only to the most risk-averse. In turn, he suggested a portfolio of high-quality dividend-yielding equities could provide yields in excess of fixed income while also providing protection to withstand a great deal of volatility.