Controlling for other factors, such as the supply of government debt, research at the Bank has sought to identify the impact of ICPF purchases on the yield curve. It finds the impact to be material, especially at the longer end of the yield curve. Over the period 1990 to 2010, it finds that pension funds purchases lowered the two-year real yield by around 70 basis points  6  6  Data are adjusted to remove impact from re-valuation effects. BIS central bankers’ speeches  and 20-year real yields by around 165 basis points, with the price pressures most acute during the period 1996 to 2004. For insurance companies, the bulk of the buying pressure comes somewhat later (2006 to 2010) and the impact is somewhat smaller (30 basis points and 75 basis points respectively). Nonetheless, if these ready-reckoners are even roughly right, they suggest a very significant impact of ICPF portfolio allocation on yields, and hence on incentives to hedge further, in a pro-cyclical spiral. This evidence, while far from conclusive, provides some important clues. There are indications of correlated, pro-cyclical swings in asset allocation and asset prices induced by asset managers’ and their clients’ behaviour. Like bankers, institutional investors have risen and fallen with the herd. Keynes’ bankers and today’s asset managers may not after all be such different beasts. Patient capital There is a second, long-term, set of risks and opportunities posed by the asset management industry.

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