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 →
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 →
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 →
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 →
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 →
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 →
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.
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- European Pensions Management went bust in June 2016. It was then acquired by Suffolk Life, which is part of Curtis Banks Group.
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 →
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
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…a stock allocation as
I had the honour of meeting legendary Bill Bengen of the Safe Withdrawal Rate fame last week.
Our meeting took place near his home in Palm Springs, California. Given his accomplishments, he struck me as a very humble and down-to-earth person, a rare virtue in financial services!
After the pleasantries, we sat down and ordered a drink. I asked Bill if he had any idea when he wrote his first paper in 1994, that his methodology was going to become something of a gospel on retirement planning. “Not at all. I started the research in 1993 and wrote my … More →