Thu, 04 Feb 2016 12:09:00 GMT
Alpha describes the excess returns a fund can generate relative to the return of a reference benchmark. This benchmark return is called Beta.
Traditionally, these benchmarks were market cap weighted indices, such as the FTSE All Share or S&P 500. Since the 1970's, it has been possible to buy cheap access to them via passive funds.
Click to tweet >> An increasing number of Smart Beta strategies have tried to improve on the market cap weighted benchmark: http://bit.ly/1Po1gnP
In recent years, an increasing number of Smart Beta strategies have tried to improve on the ...
Tue, 22 Dec 2015 10:02:37 GMT
The landscape for managing pension schemes continues to change..
Now, more than ever, pension trustees and corporate sponsors are facing a number of challenges: lower yields, sponsor balance sheet and new regulations to name a few. However, the fundamental problem still remains the same. To secure and protect member benefits, funding deficits have to be repaired.
In the past, deficit repair discussions have happened in a silo way. Every three years, trustees and sponsor would get together and have what is more of a negotiation over contributions, rather than aim to agree a long- ...
Tue, 24 Nov 2015 13:28:11 GMT
PRS is becoming an area of interest for institutional investors. Why?
First of all, what is it?
Private Rented Sector (PRS) is residential property that is not occupied by the owner but rented out by private (as opposed to social) landlords. The English Housing Survey suggests it currently represents 19% of the English residential market.
According to PIA Property Data Report (2014), the UK Private Rented Sector market is £839bn in size. To put that into context, the UK commercial property market is £683bn.
Why is it interesting for potential investors?
Tue, 10 Nov 2015 09:59:25 GMT
Clients often ask us to what extent our expected returns should adjust to changing market conditions. For an investment grade bond, this is relatively easy - you will earn the credit spread less any defaults. So it’s quite straightforward and objective. For equities, it is much harder to say whether the market is over or under-valued. There are lots of measures that appear to work historically, but interpreting the evidence is fraught with subtleties. One commonly used metric is the Shiller P/E ratio- but does the evidence hold up?
Shiller P/E Ratio
Click to tweet >> T ...
Thu, 13 Aug 2015 14:44:39 GMT
In our previous RedBlog post, my colleague Dan discussed how to incorporate expected rate rises into the liability hedging decision. In this piece I offer an alternative perspective on yields and liability hedging.
A Little Background
Over the last few years, many investors have delayed hedging as they believed that benchmark yields would increase, meaning that hedging would be cheaper later. These increases were expected as a result of the end of quantitative easing and central banks raising their historically low policy rates.
It has been a long wait.
Today, unemployment is c ...
Tue, 11 Aug 2015 12:34:08 GMT
Most pension scheme trustees would agree on one thing. Long-term interest rates are at low levels in the UK today (compared to their history). It’s easy to find explanations for this among economists. It's just as easy to find predictions they will go up, down, or stay the same. Unfortunately economists and markets have a poor track record of predicting interest rate moves.
The point of this post is not to offer another view on interest rates.
If we believe rates are rising should we still be hedging?
Pension schemes feel like they are stuck between a rock and ...
Mon, 27 Jul 2015 16:55:33 GMT
How can the language of music help to decipher the jargon in pensions? Many industries and professionals carry their own technical language (“jargon” for everybody else), so it can be helpful to translate this into more familiar terms.
During her one week internship at Redington, A-level student Antara Roy did just this – read on to see how playing a flute is useful in learning how to prepare a flight plan:
"A passion of mine has always been music; whether it has been listening to ...
Mon, 06 Jul 2015 18:33:14 GMT
“When deciding how to invest a pension fund’s resources you must consider the indexation treatment of each liability tranche to get an accurate picture of the interest rate and inflation sensitivity of scheme liabilities”…
…was definitely not what was going through our heads when first joining Redington. It’s easy to look back just 10 months and laugh at those, frankly, basic questions.
The asset universe is an endless world of complexity. A world full of mystery and confusion.
Even the acronyms themselves were more than enough to deal with, ...
Tue, 30 Jun 2015 15:05:59 GMT
In my last Pensions Expert column, I wrote about the challenge for the new Pensions Minister in balancing short-term political expediency with truly progressive pensions policy.
If we are to achieve long-term sustainable retirement provision, policy needs to be aligned with long-term objectives rather than short-term vote-winning.
There have been calls from some quarters for the new Pensions Minister, Ros Altmann, to consolidate the changes made under Steve Webb and his predecessors and resist radical reform. Yet affordability of pensions is one of the UK’s biggest challenges ...
Tue, 23 Jun 2015 09:37:23 GMT
Because sadly, prioritisation doesn’t always mean doing the easiest thing first…. or the sexiest.
In their quest for performance, amateur cyclists, like a number of Trustees and CIOs, can sometimes focus their attention on the wrong things… in this respect, setting the right investment strategy is not dissimilar to cycling and gives rise to the same pitfalls.
We love to focus on the “sexy” and forget about the basics.
What’s Your Average Amateur Cyclist Got To Do With Investment Strategy?
Take your average enthusiastic amateur cyclist. You ...