Asset Allocation – Page 192
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Features
Equities' Jekyll and Hyde
The Dutch asset management house Robeco last year announced that it was launching its first value fund, benchmarked to the MSCI World Value Index and investing solely in undervalued securities. The significance of this is that Robeco has a strong tradition of growth investing. Its Rolinco fund is a pure ...
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Retirement programmes: extreme makeover
With his mandate re-affirmed, Bush has prioritised two ambitious goals within the ‘ownership society’ – privatising social security and revamping the private pension system. Such boldness is not rhetorical: Bush’s previous term demonstrated a commitment to his fundamental agenda. The President has not previously shied from audacity; having been re-elected, ...
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Still waiting for the future
By far the most important development in the Belgian pensions market has been the provisions for industry-wide pension schemes set out in the Vandenbroucke Law which came into effect at the beginning of last year. The main aim of the law – to boost second-pillar pension provision by creating industry-wide ...
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Sorting the sheep from the goats
The Gothenburg-based Andra AP-fonden (AP2), one of the national ‘buffer’ funds of Sweden’s pension system, took the unusual step last year of terminating 16 of its domestic and European equity mandates at one stroke. This bold move was part of a strategic decision to draw a clearer distinction between the ...
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The search for the holy grail
The Capital Asset Pricing Model of financial theory is the root of the Alpha, Beta distinction. This model is shown below: where R is the return from respectively the portfolio and market, alpha and beta the objects of interest and epsilon a residual error term. This is a simple linear ...
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Lego: piecing it together
When the founder of the Lego company, Ole Kirk Christiansen, came up with the brand name, he was apparently unaware that it means ‘I put together’ in Latin. It is appropriate in this context as that is exactly what the company, based in Billund, Denmark, has been doing recently with ...
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Where the long-run returns lie
Markets are volatile, with much variation in year-to-year returns: we need long time series to make inferences. The periods we examine must be long enough to incorporate the good, the bad and the indifferent times. In this article we provide an update on long-run returns on stocks, bonds, bills, and ...
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Turning to private markets
The expectation of continuing low returns over the next decade has left investors scrambling for new approaches to asset allocation, desiring to move beyond the horizons of modern portfolio theory and on to the postmodern universe. One stab at defining a postmodern portfolio theory is presented in a recent report ...
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Spending risk in the right places
Most pension funds currently use a two-stage process in determining investment strategy. First, they determine their strategic asset allocation (SAA) using asset liability modelling based on the unique liability characteristics of the fund. This creates the allocation to various asset classes known as the policy benchmark. Managers are then appointed ...
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Stalemate in Prague
The works of Czech 20th century literary giants Franz Kafka, Good Soldier Svejk author Jaroslav Hasek and Vaclav Havel come to mind as one watches the country grapple with the question of pension reform. While the Czech Republic emerged from its kafkaesque period with the fall of the Berlin Wall ...
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Why absolute returns rule
In a bear market, investment managers pursuing relative returns strategies can offer their clients both good news and bad. The bad news is that they have lost money. The good news is that they have not lost as much money as everyone else. Managers implementing absolute return strategies, however, can ...
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Infrastructure's class act
For pension funds the attraction of investing in infrastructure projects – roads bridges and airports – is that they can provide stable long-term returns and a good match for long-dated liabilities. However the drawback is that few pension funds have the expertise to assess the risk and returns of individual ...
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Not all on the same hymn sheet
“Historically, pension funds gave all their assets to one manager. Then they realised that one manager could not outperform over every asset class. So they turned to specialists, and ended up with several asset managers, 10 or 12 reports, and a very complex structure. Multi-manager (MM) is the solution. It ...
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Hedge funds by another name
According to Mercer’s study of UK pension fund asset allocation, tactical asset allocation (TAA) is also anticipated to become more popular, with the proportion of schemes using TAA expected to rise from 3% in 2004 to as much as 10% this year. David Tucker, of the UK arm of Australian ...
