LONG CAPITAL: The rules of pension fund investment have changed

Rising inflation and the AI infrastructure bubble have brought turmoil and speculation to the retirement funds investment market.

For more than four decades (1980-2020), retirement funds operated in an environment cushioned by falling inflation, declining bond yields, cheap capital and expanding globalisation.

As Mario Fisher, chief investment officer at Momentum Systematics, told the Institute of Retirement Funds Africa (Irfa) 2026 Conference at the CTICC, those tailwinds have vanished.

“Many investment frameworks were built for a world that no longer exists,” he said. “We are not experiencing a normal cycle. We are experiencing a regime change at the moment.”

Fisher reckons that efficiency is being replaced by resilience and security. Geopolitics, fiscal deficits, supply chain duplication and carbon transition expenditure are driving higher structural inflation and interest rate volatility. In this environment, traditional 60/40 equity-bond portfolios and sovereign bonds no longer offer automatic diversification.

Irfa chairperson Nancy Andrews took the stage directly after him in a one-two punch that knocked the puff out of the chest of many fund managers.

She made a different point about retirement fund trustees who can no longer evaluate governance purely by procedural compliance; success is measured by actual post-retirement purchasing power.

“Governance is something that we learn daily. Members don’t experience our governance structures; they experience the outcomes. If we do not get it right, they feel the brunt of it... Strong governance does not start with having the right answers, but with asking the right questions.”

This focus on member experience is echoed by financial regulators. The Financial Sector Conduct Authority (FSCA) has signalled a decisive transition from compliance-based supervision to outcomes-based regulation, focusing heavily on value for money, cost transparency and active ownership.

But these original peddlers of patient capital must be wary of the AI bubble. While technological breakthroughs offer immense long-term potential, the current market fervour surrounding AI presents acute risks for institutional capital.

The biggest challenge of the AI investment bubble is the stark mismatch between institutional liability horizons (10-30 years) and the unproven long-term commercial mechanics of AI technology.

Executive chairman of Gaia Capital, Mich Nieuwoudt, has already shared controversial takes about infrastructure investment with Daily Maverick, but even he is cautious with this particular beast.

“I am paid, and we make a lot of effort to think about how the 10-plus-year future is going to look on AI and data centres,” he explains. “If anyone tells you they know how it’s gonna look five years out there, they are liars...”

“I don’t know how to invest pension fund money in something that I have no clue how the mechanics of it is going to work in five years’ time. I am 100% certain... that in 20 years’ time we’ll still be using electricity. I am unsure whether in 20 years we’ll still be using AI as we are using it today.”