In the last decade, investor interest in long-horizon outcomes was rare and when it prevailed, it was severely tested by events. The long-term was viewed as opaque and uncertain. It's amazing how attitudes change when new opportunities emerge.
A recent research paper that likens the three main retirement planning approaches to shapes provides an interesting way to think about three different retirement planning approaches. In the end, the best option may incorporate all three.
A recent paper that addresses one of the most pressing issues facing the financial community - how to construct long-term investment portfolios to best fit the needs of those saving for retirement - questions the appropriateness of many commonly used techniques.
Having built some satisfaction that their retirement savings balance is sufficient, clients ask "How much can I afford to spend?"
The impact investing market will be worth US$1 trillion in coming decades. It is important for practitioners to realise the impact that their client's capital can have on society.
To outperform the market you have to invest in something different. Investment returns are best captured through the exploitation of anomalies – the truly different mispriced opportunities.
In the US, institutional investors have a significant impact on future stock performance. Extending this research globally shows that ownership signals can supplement a traditional factor model and improve long/short performance.
For a portfolio’s position to add up robustly, it must reflect future risks and respond to how these change through time.
Investment managers around the world believe their style is the holy grail of generating returns ahead of the market. But you can’t beat the market using a simple rules-based strategy.
Investment in a well diversified and risk controlled mix of Risk Premium strategies is essential to building a robust portfolio through good times and bad.
Constructing portfolios that capture the upside while limiting the downside is more important than ever. Derivatives can help multi-asset investors in three key ways.
An active portfolio of high-quality Australian companies paying sustainable dividends is part of the solution to protect living standards against income shocks and inflation.
Emerging markets infrastructure plays a powerful role in a portfolio. However many investors make assumptions around the risk of these markets and ignore them to their detriment.
Introducing an active global credit investment into portfolios adds to an investor's opportunity set, and can offer alpha opportunities.
Managing carbon risk within portfolios is increasingly a decision integral to risk management and the pursuit of superior long-term risk-adjusted returns.
Portfolio construction must stay relevant. While traditional country and sector allocations may have worked in the past, today's new environment requires a global and flexible approach.
There are many risks and uncertainties as retired clients face the next 20 to 40 years. The uncertainty related to the period of retirement can be allowed for, to enable retirees to have a higher living standard during their retirement years.
Time-based rebalancing is inefficient. Research suggests that tolerance band rebalancing strategies minimise trading and boost portfolio returns. Such threshold approaches may be used in both the portfolio accumulation and decumulation phase, and act as a pre-commitment device for clients.
In a world where 0.6%pa is top quartile, winning is difficult and losing is easy. There are big gains to be made in surprising places. Even 1%pa adds up to a huge difference over time.
Advisers are increasingly eschewing active managed fund managers, and instead are supplanting themselves as tactical managers of "passive" ETF funds.
The number of publicly listed companies in the US has roughly halved since 1996, a phenomenon which spans other regions. The trend is likely to persist, and it has significant implications for investors.
Ensuring your investment process has the flexibility to incorporate sustainability factors all adds up to improved longer term portfolio performance outcomes.
Investing is simply deploying savings to generate returns, yet abstractions such as indices are creating unnecessary complexity. Nowhere in an effective investment process need there be any reference to the prospects for a market index.
Loss avoidance and simplicity are highly attractive to the human mind. However, uncertainty is often the source of superior returns and creativity can be a key source of alpha, delivering idiosyncratic outcomes.
In a developed world full of challenges, a consistently applied process that focuses on both the cyclical and secular outlook is something that every investor can apply.
Investors need to employ a rigorous and consistent valuation methodology, seek to minimise forecast error bounds and disregard traditional cap weighted benchmarks.
There is a growing body of evidence suggesting that chronological (C) age is dominated by biological (B) age as a better proxy for longevity risk. Practitioners must consider both ages when building portfolios and structuring retirement spending strategies.
People often consider risks in isolation, and overpay for protection as a result. Rather than hedging against specific risks, investors should think like a game theorist.
Portfolio construction practitioners have traditionally split into two camps - passive indexers, or active investors aiming to either pick winning companies or fund managers who can identify such companies. In this Critical Issues Forum session at the 2011 Conference, US-based researcher Michael Kitces provided a new and robust framework to understand the opportunities for value creation in portfolios...
Do you know the impacts of the risk characteristics of your multi-manager portfolio? Better portfolio construction occurs when you don't diversify the risk you are trying to capture. Beware the benchmark hugger - it might be you?
Shifts in economic and trade regimes and turning points in markets provide asset managers the opportunity to capitalise on short-term distortions in asset prices and to invest in companies that could be winners in the long term.
This paper explores the issues and challenges associated with longevity and sequencing risk, especially in the current market environment, and examines how alternative investments offer investors potential solutions for these risks.
Investors often shy from investing in “non-traditional” sources of Risk Premia, but to maximise the probability of achieving positive excess returns, a well-diversified and risk-controlled mix of Risk Premium strategies is essential.
Ensuring your investment process incorporates sustainability factors - climate change, global food shortages, water shortages, and poverty, as well as safety, management and governance scandals - adds up to better outcomes.
Two recent studies shed light on retirement income planning. One proposes a framework to avoid the pitfalls of shortfall probabilities. The other finds biological age impacts spending rates.
While the use of a discount rate to compare strategies or choices that are dispersed or occur over time is useful, the proper discount rate is the investor's expected rate of return, means that the "right" discount rate will vary from one person to the next.
This Due Diligence Forum Research Paper, presented at the 2011 PortfolioConstruction Forum Conference, proposes an asset allocation approach that makes more complete use of information available about the future, forcing consideration of different time frames, alternate outcomes, and tail risk...
The classic view of cash when investing is that it's something to minimise. But a recent study found that we're just not content without a healthy allocation to cash. In fact, pushing investors to put all their cash to work increases their financial stress.
Masterclass NZ is a post-graduate extension program focused on contemporary issues that are fundamental to building better quality portfolios. The one-day program is comprised of five research-based, active learning sessions:
The danger that sequence of return risk can devastate a retirement portfolio is both increasingly recognised and frequently misunderstood. Three research-driven strategies can help manage it.
This paper presents evidence to suggest that an allocation to impact investments can contribute potential portfolio benefits from the risk-return profile and low correlation with other asset classes.
Research suggests we mentally account for income and assets with an intrinsic hierarchy of priorities - a "hierarchy of retirement needs". So retirement income strategies should be reframed to answer three questions.
Markets Summit 2017 delivered 20+ high conviction ideas on how the winds of change are affecting the outlook for economies and asset classes - and delegates were asked to convert the insights into four fundamental portfolio construction decisions.
A recent, widely circulated article suggested the major Australian banks are overpriced. But including the effect of imputation and a view on interest rates makes a huge difference...
Finology Summit 2017 focused on how "The winds of change" are affecting how investors think and behave with respect to money, and how we can better to relate with them. Here are our key takeouts.
Markets Summit 2017 delivered 20+ high conviction ideas on how the winds of change are affecting the outlook for economies and asset classes - and the implications for portfolios. Here are our key takeouts.
A formal, written spending policy can help investors focus on what's really important - will they meet their goals?
As 2017 began, there was (once again) an air of optimism that interest rates are about to return to normal. This optimism dismisses the significant structural headwinds that are prevalent.
When positioning a multi-asset, portfolio for the medium-term, there are four fundamental decisions we must make now. They are, in some cases, interdependent.
2017 will present many risks and opportunities, as the winds of change sweep through the global economy and markets. Geopolitics will dominate. The only certainty for 2017 is uncertainty.
In 2002, we embarked on a quest to identify the secular forces which would substantially influence markets over the coming decade. We proposed five megatrends - which still drive portfolio construction today.
Beware using risk tolerance assessment tools that blend risk tolerance and risk capacity into a single result. The two need to be measured separately.
How often should a portfolio be rebalanced? Rather than the conventional wisdom of rebalancing at fixed time intervals, a superior methodology is tolerance band rebalancing.