Living on planet GARS: Lessons in how (NOT) to invest

Living on planet GARS: Lessons in how (NOT) to invest

A recent article in the Guardian is the latest indictment of the Standard Life GARS fund. The fund has underperformed virtually all imaginable benchmarks over the last three and five years.

3-Year Cumulative Return

5-Year Cumulative Return

Is it just me or does anyone else remember a time that the fund was a top holding in many advisers and DFMs’ portfolios? If you weren’t holding GARS in your client’s portfolio, you weren’t cool. However, times have changed. It is far less popular these days. But with £20 billion in AUM, GARS remains a flagship fund for SLI/SLA (or is it

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Lessons from 118 years of asset class returns data

Lessons from 118 years of asset class returns data

The annual Credit Suisse Global Investment Returns Yearbook (2018) should be on your reading list.

Compiled by Professors Elroy Dimson (Cambridge), Paul Marsh and Mike Staunton (London Business School), this epic publication provides incredible insight into asset class return going back 1900! So, we have 118 years data on major asset classes (Equity, Bonds, Bills), inflation and currency for 23 countries and three regions (World, World ex-US and Europe).

The data provides a colourful perspective on the behaviour of asset classes under a very wide range of market conditions, from the best of times to the worst. This insight doesn’t … More →

Phoenixed! The end of Standard Life as we know it and implication for platform users

Phoenixed! The end of Standard Life as we know it and implication for platform users

The big news on Friday is that Standard Life Aberdeen (SLA) has agreed to flog its life and pension business to the grandmaster of dead closed book consolidation, aka Phoenix Group. Phoenix is where customer service goes to die. It’s where life policies become lifeless, and pension plans are ‘zombified’. You might remember such names as Pearl, Abbey Life, Sun Life and Axa Wealth! But you only really know Phoenix exits when you’re banging your head against your desk trying to get a valuation from them.

With this deal, SLA is effectively getting out of life and pensions business for … More →

Cash reserve buffers, withdrawal rates and old wives’ fables for retirement portfolios

Cash reserve buffers, withdrawal rates and old wives’ fables for retirement portfolios

Managing retirement income portfolios is riddled with old wives’ fables; practices handed down from adviser to adviser but with very little empirical basis. (Really, these practices are often promulgated by men, so the term ‘old men’s fables’ is probably more appropriate but that doesn’t roll off the tongue. But I digress)

One of such practices is the idea that holding large cash reserve in a retirement portfolio helps mitigate sequence risk and improves the sustainability of a retirement portfolio. The reasoning is that, by holding 2 to 5 years worth of income in cash, you avoid selling down equities during … More →

The art of delivering negative alpha

The art of delivering negative alpha

One area we looked at in the latest multi-asset fund research is whether multi-asset managers can justify their existence (and high fees), by pointing to the alpha they generate. This is the return they can bring in, over and above the market portfolio.

To illustrate this point, we looked at the alpha for the last five years of multi-asset funds.  For this assessment, we divided multi-asset funds into five risk categories, based broadly on their asset allocation and volatility of each fund. Each risk category includes funds aimed at clients with similar risk profiles.

Then we examined the alpha delivered … More →

The Multi-Asset Fund Gravy Train

The Multi-Asset Fund Gravy Train

In the late 1600s, William III introduced the so-called Window Tax, a levy on people living in homes with more than six windows, a crude measure of prosperity at the time.

To avoid this tax, some homeowners responded by bricking up all windows except the six! As the bricked-up windows prevented some rooms from receiving any sunlight, the tax was referred to as ‘daylight robbery‘, because it was considered to be a tax on light and air!

Today, we published the 2017 edition of The Multi-Asset Fund Guide titled The Gravy Train. A key conclusion of the … More →

Spotting the equity market bubble

Spotting the equity market bubble

Everywhere you turn these days, there’s talk of asset class ‘bubbles.’

Apparently, we’ve got a bond bubble. An equity market bubble. A property price bubble. A Bitcoin bubble. Oh, and a passive fund bubble! Hell, we’ve got a bubble of bubbles!

It’s not hard to understand why many think equity prices are elevated, and a ‘crash’ will inevitably follow. We’re now over eight years into the current bull market, and there are increasing concerns that equity valuations may be too high.

 

Get your CAPE on!

One of the more reliable valuation metrics is the Cyclical Adjusted Price Earnings (CAPE) … More →

Calm after the storm for SIPP providers?

Calm after the storm for SIPP providers?

They say time flies, but in financial services, it does so at the speed of light!

And what a difference a year can make! This time last year, the FCA introduced new capital adequacy requirements (PS14/12) for SIPP providers.

As we anticipated in our last SIPP Financial Stability Report report, not everyone made it to the other side in one piece. Some providers fell by the wayside in the run-up to September 2016 and the months after it.

  • European Pensions Management went bust in June 2016. It was then acquired by Suffolk Life, which is part of Curtis Banks Group.
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Royal London ‘Drawdown Governance Service’: the future of income drawdown?

Royal London ‘Drawdown Governance Service’: the future of income drawdown?

Since the introduction of pension freedoms, providers have talked about ‘innovation’ until they, and we, are all blue in the face. Thankfully, it appears that’s starting to change!

Royal London has put its money where its mouth is. It recently launched a new Drawdown Governance Service (DGS). And there’s a lot to like about it.

It’s not quite in the same class as Frank Whittle’s invention of the Jet Engine or Tim Berners-Lee’s invention of The Internet, as RL’s marketing brochure seems to suggest. But considering how unimaginative providers have been on the subject of retirement income till date, … More →

Lower equity allocation in retirement: reducing risk or shooting yourself in the foot?

Lower equity allocation in retirement: reducing risk or shooting yourself in the foot?

Asset allocation is a key factor when deciding sustainable withdrawal rate in a retirement income portfolio. And one of the most important decisions is what proportion of a retirement income portfolio should be allocated to equities.

The received wisdom is that allocation to equities should be lower during the retirement income stage. The rational behind this include the fact that retirees tend to have lower risk appetite and reduced risk capacity.

 

Yet, the common practice in the industry isn’t supported by cold hard empirical evidence. Indeed, in his seminal 1994 paper, Bill Bengen recommended

…a stock allocation as

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