Wed, 20 Jul 2016 08:24:56 GMT
On Friday, June 24th, Britain voted to leave the European Union. It’s fair to say this surprised a lot of people (on both sides), including the markets. Falling interest rates, a weaker pound and political uncertainty has left a lot of people feeling on edge.
For those of us responsible for managing pension funds, can it be useful to reflect on the “VUCA” of our time.
Volatility, Uncertainty, Complexity and Ambiguity
Derived from the US military and now used in corporate strategy, VUCA is a term used to describe extreme conditions. For those of us in the w ...
Fri, 24 Jun 2016 16:06:53 GMT
The ramifications for investors of the UK’s referendum decision will take some time to materialise.
We are entering uncharted territory - nobody knows precisely how Brexit will be implemented or its consequences.
What is clear is the result will herald a period of considerable uncertainty and market volatility.
If we have learnt anything from history, it is that these kinds of major events happen surprisingly regularly. Which is why it is so important to design and implement a robust, risk-managed and well-diversified investment strategy for the long term. And why it so imp ...
Thu, 16 Jun 2016 11:19:38 GMT
What are the economic implications, potential market impact, and consequences for UK pension schemes of Brexit?
In my previous post, I discussed the timeline for Brexit, should it happen, and split it into three periods: pre-referendum, post-referendum negotiations and post-negotiations.
The purpose of establishing these divisions was to emphasize that leaving the EU would not elicit an immediate step-change for the UK economy. The change would be gradual and the economy would behave differently in each period.
With that in mind, let’s consider (briefly!) the economic impli ...
Thu, 19 May 2016 12:34:13 GMT
At Redington we read with great interest the pension regulator’s DB funding statement 2016. I thought the four key takeaways from an investment perspective were:
1. Acknowledge the importance of negative cashflow, and plan for it.
“As schemes mature, liquidity planning is becoming an important consideration, especially where the cash flow requirements represent a significant proportion of the scheme assets. Market developments may mean that schemes are forced to sell assets at lower than expected prices in order to meet cash flow demands. This could put increased pr ...
Mon, 25 Apr 2016 11:59:02 GMT
Automobiles started out as a toy for the rich, a symbol of excess.
They were complex and needed expert drivers. Then, Henry Ford came along and turned it all on its head. The Ford ‘Model T’ was revolutionary for its time - it helped bring cars to the masses and took the mystery out of the ‘horseless-carriage’.
Is the way we look at hedge funds not dissimilar to the infancy of the automobile industry?
Surrounded by mystery, a black box that’s reliant on the magic of manager skill, so-called ‘alpha’. People pay for things they don’ ...
Wed, 13 Apr 2016 11:48:32 GMT
Unless you have been living on Mars for the last few months...
In a cave, with your eyes shut, and your fingers in your ears...
It will have come to your attention that there will soon be a referendum on these shores.
Depending on your political hue, this referendum is one of two things:
An opportunity for the United Kingdom to unshackle itself from an ossified bureaucracy, to protect its borders, and to finally Make Britain Great Again.
A grave threat to the prosperity of the British people, which has been seized upon by political opportunists for personal ...
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 ...