Gurjit Dehl

Articles from Gurjit Dehl

  • MERRY CHRISTMAS, HAPPY HOLIDAYS AND BEST WISHES FOR 2015

    A huge thank you to all our readers and authors, we hope you have enjoyed RedBlog this year—and it provided some food-for-thought. There is much more to come in 2015 so we look forward to seeing you all then. Before that, here is our eCard to get you into the festive spirit!   With season’s greetings and best wishes for the New Year, Gurjit   ..read more
  • PLAN FOR THE BEST, BE PREPARED FOR THE WORST: MACRO OVERVIEW AND THE END OF QE

    Imagine you are the captain of a ship. You’ve just passed through a great storm and the skies look clear ahead, so you prepare to hoist the main sail and go full speed ahead. However, when you look behind, you notice the storm still looms and appears to be catching up with you. The ship has clearly been damaged and it’s not certain it would survive another battering. What would you do? Following this week’s “Macro Overview” teach-in, that’s the position I feel investors are in today – the economic outlook ahead appears rosy, with ... ..read more
  • MOST POPULAR BLOGS IN 2013

    In 2013, 81 new articles were published on RedBlog. The following five are the ones you found most popular – any surprises in there?#1 Mitesh Sheth, Is it really possible to identify good fund managers? Research conducted on US equity funds suggested that funds recommended by consultants do no better than any other. Mitesh responds to this conclusion and picks out the common traits of the best fund managers, including their sources of competitive advantage.#2 Dan Mikulskis, PV01 & IE01: Models on models The rise in inflation expectations in 2013 was a worrying development ... ..read more
  • IF ANYONE CAN, CAN CARNEY?

    The Bank of England’s new governor is not afraid to shake things up. Can Carney leave his mark by helping the UK return to robust growth with low and stable inflation? Since taking the helm at the Bank of England (BoE), Mark Carney has implemented some noteworthy changes: Forward guidance: to promote transparency in its policy, BoE has outlined unemployment thresholds alongside inflation caveats which would prompt a discussion on removing monetary stimulus. Click here for more information.   Easing and widening liquidity facilities: in an effort to promote growth ... ..read more
  • IT'S ALL IN THE PLANNING AND THE LORD OF THE RINGS

     The following article was written by Owan Haughey during his internship at Redington. Owan is studying Physics with Computer Science and will be entering his third year at the University of Birmingham.  At a Glance  Objectives: Destroy the Ring, eliminate the deficit. Approach: Travel to Mordor with the Fellowship of the Ring, setup a strategic framework. Result: The Ring was destroyed, the fund reached full funding.       I, like many of you, have read the Lord of the Rings books and seen the films many times. It is a great story with a wonder ... ..read more
  • EASING INTO HEDGING? WHY PENSION FUNDS SHOULD STILL HEDGE IN SPITE OF FORECASTS

    The following article was written by Tom Pilcher during his summer internship at Redington. Tom is a third year student of Economics and Accounting at Bristol University.   Since the Bank of England (BoE) started its quantitative easing (QE) scheme in late 2008, pension funds have suffered soaring deficits: according to the PPF7800 index, deficit figures ballooned from £194.5bn at the end of 2008 to £256.6bn in April 2013. There may be light at the end of the tunnel, however, as financial markets stir. Following recent stagnation, investors raised their expectations of ... ..read more
  • TOP 12 IN 2012

    Thank you to all our readers for making 2012 a great year for RedBlog!   We are always on the lookout for new authors with a fresh perspective on pensions, markets and economics. If you would like to contribute to RedBlog, please drop me an email – gurjit.dehl@redington.co.uk.   Here’s a rundown of the 12 most viewed blogs in 2012: 1. RPI v CPI: Magic new formula will lead to shrinking wedge – Kenny Nicoll 2. World population evolution (infographic) – Dan Tracey 3. CRY! It’s a Kodak moment – Dawid Konotey-Ahulu ... ..read more
  • INFOGRAPHIC - EUROZONE SCENARIOS AND PENSION SCHEMES

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  • GENERATION Y - IN THEIR OWN WORDS

    Most of Gen Y will never see a final-salary pension but are they aware of the shift from DB to DC and the importance of saving from an early age? Do they even know what a pension is, let alone appreciate the importance of stashing away some cash for their latter years? Below are two more essays from Redington’s recent interns. The same key theme resounds – What do they want? Education. When do they want it? Before now! A Young Person’s View towards Pensions by Anya Ratnavel, first year student at Oxford University Having just turned eighteen and left school, I ... ..read more
  • Q+A WITH MARK HERNE - FPCAs

    In this interview, Mark Herne explains the term “Flight Plan Consistent Assets” and how they can help pension schemes along their path to full funding. Mark is a managing director of investment consulting at Redington. Flight Plan Consistent Assets (FPCAs) – how do you define them and what are the key characteristics? I have never been a fan of the term FPCAs, it just happens to be a useful catch all expression for us. A “flight plan” goes in hand with the theory of a “glide path” or “journey plan” of some description. In ... ..read more
  • MISSED EDUCATION OF GENERATION Y

    According to a 2011 survey by ‘The Job Crowd’ the pensions industry has the most fun people to work with. The ‘fun’ nature of the pensions industry should not be confused with the serious duty of the work we do. Saving for retirement, be it through a pension or other means, is vital for anybody wishing to finance their later years. Yet the industry appears to be lagging in passing this message on to younger generations. Here are a few recent examples of industry folk talking about Gen Y:     - Simon Kew, aka @PensionsJackal, wrote that pensions&rs ... ..read more
  • OPERATION DOUBLE-TWIST

    There’s a lot to be learnt by looking back through history. However, it is not just your own history that is important, and particularly not when trying to use the past to peer into the future.   As gilt yields hit fresher and fresher lows, they bring many questions to pension fund trustees trying to improve their funding level or looking to hedge their liabilities:       - Is it safe to buy gilts?     - Is it time to sell gilts?     - What are gilts and why are they destroying our funding level??   Here we will con ... ..read more
  • MORE OF THE SAME?

    They thought it was all over - it isn’t yet. Kicking the can down the road has been the policy response du jour, only now the can is getting bigger and becoming harder to kick each time. Central bankers are preparing to refine and reload their monetary weapons as a deeper dip hits the UK economy and Eurozone woes prove to be contagious. Meanwhile, investors are left to ponder when all this will be over and where to put their money in the meantime and/or for the long term. The chart shows the cumulative total return from various asset classes since 1999: This time period encompass ... ..read more
  • BETWEEN A ROCK AND A BIGGER ROCK

    What do you do when you’re caught between a rock and a bigger rock? Most likely, you choose to chip away at the smaller rock until there is a way out, however long it may take. And that seems to be the case with the global economy today, at least within many developed markets – policymakers are chipping away at the small rock in order to avoid being hit by the bigger rock. So what are the rocks and why are policymakers (arguably) choosing this option? The smaller rock is better known as ‘Financial Repression’ – a term which is receiving more and more airpla ... ..read more
  • SAILING YOUR SCHEME THROUGH THE EUROZONE STORM

    Navigating a pension scheme through these turbulent financial markets, while maintaining its course to full funding, is not for the faint of heart.  Funding levels have dropped as falling bond yields and high inflation raise liabilities faster than investment returns raise the asset side of the balance sheet. Sadly, nobody truly knows what will happen next in the Eurozone (EZ). Thankfully, there is a way to turn some of the ‘unknown unknowns’ into ‘unknown knowns’ via the power of ALM modelling. At a recent trustee education event, Redington consultants prov ... ..read more
  • CHART OF THE WEEK - TIME VALUE OF MONEY

    [Please note that all opinions expressed in this blog are the author’s own and do not constitute investment advice.  Click here for full disclaimer]   ..read more
  • CHART OF THE WEEK - UK v JAPAN SWAP RATE

    [Please note that all opinions expressed in this blog are the author’s own and do not constitute investment advice.  Click here for full disclaimer]   ..read more
  • CHART OF THE WEEK - 30 YEAR GILT YIELDS

      [Please note that all opinions expressed in this blog are the author’s own and do not constitute investment advice.  Click here for full disclaimer]   ..read more
  • YIELDS: WHICH WAY IS UP FROM HERE?

    Interest rates remain one of the key risks facing pension scheme liabilities, alongside inflation and life expectancy.  2011 was not a good year as the yield on UK government bonds fell sharply – 10 year yields are 1.60% and 30 years 1.37% lower than a year ago.  To see the impact on schemes, we only have to look at the Pension Protection Fund’s 7800 Index – the estimated funding position of schemes covered moved from a £21.7bn SURPLUS in January 2011 to a £255.2bn DEFICIT a year later. This week, UK PLC joined the growing list of governments able ... ..read more
  • BONDVIGILANTES MEET PORTFOLIO REVIEWER

    “Western economies are bust and, well, that’s the good news.”  So began Jim Leaviss, Head of Retail Fixed Interest at M&G Investments and creator of their famous BondVigilantes blog.  Jim was chatting with David Stevenson at one of Portfolio Review Online's events.  David also runs the Financial Times’ ‘Adventurous Investor’ column.  After describing how western economies had bankrupt themselves by borrowing from future growth, based on a model of leverage and over-consumption, David and Jim went on to talk about bond mark ... ..read more
  • SIGNATURES SPEAK LOUDER THAN WORDS

    The latest EU Summit has produced lots of positive words, with 23 of the 27 countries agreeing on a new fiscal ‘compact’ (compact seems to have replaced ‘consolidation’ – genius work by some spin doctor!). Does this mean the Eurozone is out of the woods?     Not quite yet.     The pressure on Eurozone banks has eased with the European Central Bank announcing a 0.25% rate cut and, more importantly, the commencement of two 3 year long-term refinancing operations (LTROs) of unlimited size and full allotment – t ... ..read more
  • VIDEO OF THE WEEK - QR CODES

    This week’s video highlights how tech innovation is helping consumers with convenience.    Have you ever had a long day at work and had to wait for your train, with no food in the fridge and an empty stomach? In Korea, that’s not a worry – they can order groceries while waiting for a train and have them delivered in time for dinner. Thinking like a creative monetarist, could using QR codes to purchase goods increase the V (velocity) in MV=PT, helping to relieve the pressure on M (money supply) to fix all our economic woes? Many thanks to A ... ..read more
  • GLORIOUS TECHNOCOLOUR STATISTICS

    Every once in a while you just have to sit back and be amazed by something, or someone.  In this case, the ‘someone’ is Hans Rosling and the ‘something’ is http://www.gapminder.org The pensions industry spends a lot of time explaining why the cost of defined benefit (DB) pensions is rising. A few of these factors are: - There are far more of us alive today than at any point in time - We’re also living longer than ever before - But we're having fewer children (so fewer workers to financially support an ageing population) Thanks ... ..read more
  • EUROPEAN BOND YIELDS: PIIGS V NON-PIIGS

    In the last few weeks the market has been watching Italian yields as much as the VIX for a measure of sentiment. In the current environment, movements in 10 year government bond yields help to differentiate between those countries investors see as safe havens and those viewed as riskier investments. The charts above help to show which countries fit into each category.   Upward move – Bad news for governments: This can result from investors demanding higher returns to hold the debt or selling to reduce positions, for example due to lower growth forecas ... ..read more
  • IS THE RISE IN GOLD NON-INFLATIONARY?

    Has gold’s meteoric price rise impacted today’s high inflation figures?   The chart highlights a correlation of +0.95 between gold and UK Retail Price Index since 2000. The question is whether gold appreciation leads to inflation, inflation drives gold prices or are they affected by other factors? According to a 2008 report by the World Gold Council, 52% of the metal is used for jewellery, 18% held by central banks, 16% for investment purposes and 12% for industrial use (2% was unaccounted!).  At current market prices ($1,770/oz) the total ... ..read more
  • NOUVEAU PENSIONS

    In the 20th century, Defined Benefit (DB), aka final-salary, schemes were the most popular pension plans as they provided workers with the highest possible benefits. Eligible retirees receive a pension based on their final years in service (generally the highest paid).    This, of course, assumes that the scheme/company survives long enough to payout.   Defining future benefits without pre-defining current contributions led to promises being made which can no longer be kept, ceteris paribus - rising life expectancy and falling investment returns were not on ... ..read more
  • TROIKA AIRLINES AT POINT OF NO RETURN?

    Troika Airlines had a busy weekend flying delegates back from the G20 Summit in Cannes.  Investors waited anxiously for signs the Eurozone crisis would ease, hoping policymakers had agreed on a way forward.  Given yesterday's market action, those positive signs did not appear. Italian government bond yields (above) rose 30bps on Monday, closing the day at a 14 year high above 6.65%.  The market has labelled 7% as the unofficial 'Point of No Return' for governments - tough to argue against when you look at Greek, Portugese and Iri ... ..read more
  • VIDEOS OF THE WEEK - AUTO ENROLMENT

    With less than 12 months until auto-enrolment commences in the UK, a number of workplace pension schemes are coming to market to provide for employers who do not run their own scheme.  This week's videos highlight three of the options available. National Employment Savings Trust (NEST), established after the Pensions Act 2007: NOW Pensions, created by the largest pension fund in Denmark, ATP: {^youtubevideo|(width)500|(height)310|(url)http://www.youtube.com ... ..read more
  • VIDEO OF THE WEEK - DEBT CEILING

    The markets have not been much fun lately so to bring you some cheer 'Video of the Week' is here! Seen a finance related video that made you laugh, smile or feel smarter?  If so, feel free to send the link and short intro via the Contact Us form.  We'll upload and announce the winner in each Newsletter. This week's winner was suggested by Robert Gardner. Foresight in Hindsight - US Debt Ceiling Does art imitate life, or does life imitate art?   In either case, the following video from the West Wing highligh ... ..read more
  • EUROZONE BANK DISTRESS TESTS

    The 'final' figure is in - the European Banking Authority (EBA) has set a target of €106bn in fresh capital to prop up Eurozone bank balance sheets.  This assumes a Tier 1 capital ratio of 9%, with funds to be raised by 30th June 2012.  As noted on Zerohedge, the figure falls "below the €200 billion projected by the IMF, the €400 billion projected by Credit Suisse, and €1 trillion calculated by Goldman Sachs. Granted the number excludes a further €40.6 billion in sovereign capital buffer, so altogether the number is about €147 bill ... ..read more
  • EURO: HELP OR HINDRANCE?

    What happens when an economy goes off the rails and requires a boost to re-ignite growth?   Classical economists might suggest a couple of quick fixes to bring growth back on track: - Bankruptcy or default by the weakest companies, allowing those with strong balance sheets to operate with a greater share of the market - “Automatic stabilisers” kick in to support spending   The bankruptcy/default option has been closed this time round, mainly because the weakest companies have been be the most important to life as we know it, ie. banks.&nbs ... ..read more
  • BEST LAID PLANS OF BANKERS AND POLITICIANS

    It's been a busy weekend for politicans, central bankers and investors.  Following hot on the heels of US' 'Operation Twist,' European leaders are busy concocting 'Operation Make It Up As You Go Along And Hope That Germany Signs Up.' Rumours were rife but details were lacking - nonetheless, equity markets are taking the weekend's call-to-action as a positive development.  Here's a quick round-up of the main news items, followed by a few of my thoughts on their impact.What was the news: 1)  European leaders discuss increasing size and scope ... ..read more
  • MAY THE FED BE WITH YOU

    The details of the Federal Reserve's latest WMD (Weapon against Mass Deflation) have been announced.  The market reaction has not been favourable, with equities and commodities sharply lower. What did they do?  Since the start of the 'Great Financial Crisis', the Fed has almost tripled its balance sheet to $2.8trn in order to kickstart growth in the economy.  It has not had the desired effect so 'Operation Twist' (definitely not QE3...) will see them shift $400bn of their short-dated Treasuries (under 3 years) into longer-dated maturities (6 t ... ..read more
  • BEN BERNANKE'S NOT-SO-CUNNING PLAN

    On 21 November 2002, Ben Bernanke presented his poignant paper, 'Deflation: Making Sure "It" Doesn't Happen Here.'  Almost 9 years on, it reads like a brief history of central bank attempts to counter deflationary effects of the 'subprime crisis.'  Well, those forces are (arguably) back so its a good time to review Ben's paper (yes, headline inflation is high BUT exclude food and energy prices rises and underlying inflation is very, very low!). Let's ignore the fact the paper bases its arguments on a bygone era (1930s) - a ... ..read more
  • BIGGEST DANGER OF SHIFT FROM DB TO DC?

    In the UK we are seeing a shift from Defined Benefit (DB) pension plans to Defined Contributions (DC).  Can't be any harm in shifting the burden from schemes/sponsors and transferring it to members, right? The 3 minute video below suggests otherwise, as the Superintendent of Pensions in Chile talks about what other countries can learn from recent Chilean reforms. Chile opted for DC schemes over 25 years ago, yet it proved to be no pensions' panacea.  Why?  It seems many citizens did not know of the change, let alone start contributing! Auto-enrolment into U ... ..read more
  • MOVING BEYOND INFLATION TARGETS?

    An interesting story almost slipped below radar last weekend, as headlines filtered in from Jackson Hole and followed Irene's path across the US mainland.  I think it was the most interesting story of the weekend and worth some attention. Current high rates of inflation are throwing up issues for central bankers.  With inflation consistently higher than target in many countries, do they hike to stem this menace and risk any 'green shoots' turning brown, or allow inflation to tick higher and trust their models that it will fall 'in the medium-term'? The E ... ..read more
  • LIFESTYLE RISK MANAGEMENT FRAMEWORK

    One day Alice came to a fork in the road and saw a Cheshire cat in a tree. "Which road do I take?" she asked. "Where do you want to go?" was his response. "I don't know," Alice answered. "Then," said the cat, "it doesn't matter."   -- Lewis Carroll, author     Retirement - would you love to do it sooner, or later?   Many of us see life-after-work as our first opportunity to live a lot - taking those holidays we had always dreamed of or simply staying at home and watching the ... ..read more
  • INFLATION. MORE INFLATION. THEN WHAT?

    The Bank Of England is in a sticky situation.... To Hike or Not To Hike?  That is their question! To Hike - Raising rates will help savers directly (earning higher interest) and bondholders indirectly (by targeting inflation) BUT runs the risk of stifling our meagre growth. If successful, it would help both sides of a pension fund’s balance sheet. Not To Hike – Remaining on hold at 0.5% Base Rate allows the BOE and wider market to see how the Inflation v Growth story plays out. The biggest risk involves even higher inflation due to the non-domestic natur ... ..read more
  • THE GOOD, THE BAD AND THE UGLY OF INFLATION

    The markets are in a funk right now, trying to decide which type of inflation will next hit our shores. The outcome will heavily influence future economic conditions and where/how profits are to be made. To simplify, each economy can exist in one of 3 inflationary states: 1)      Positive and Healthy 2)      Positive but Unhealthy 3)      Negative   The Good – Positive and Healthy: Shagflation  “Low and stable” inflation is the main pillar and mantra of every c ... ..read more
  • SHRINKING YOUNG AND GROWING OLD

    What’s wrong with growing old?   Well, nothing! Assuming you can support yourself when the paychecks stop rolling in!!   The United Nations’ forecast for life expectancy and fertility (children per woman) paint a worrying picture – on average, we will continue to live longer but will have fewer children to show for it.   Growing Old – Medical advances have helped push average life expectancy at birth higher and higher. It is a global phenomenon, with developing regions accounting for a larger share of the increase: &n ... ..read more
  • NEW THINKING FOR AN OLD SYSTEM

    Hello and Welcome to Redington’s new blog feature – RedBlog! Here you will find insightful and delightful articles related to Pensions, Markets and Economics. “Pensions??  I’m too young to think about that!!” You’re never too old to learn new tricks, but you may become too old to retire comfortably.  To prevent this happening to you, Redington’s here to demystify the pensions’ debate as well as provide thought-provoking pieces on financial markets and macroeconomics.  “Hmmm, tell me more... ... ..read more

Gurjit used to be the editor of RedBlog and Creative Economist at Redington.

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