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The big questions in asset allocation: tough challenges and realistic answers

A famous Danish physicist once said “Prediction is very difficult, especially if it’s about the future”. This is very true of capital markets where forecasting the future direction of yields and prices is extremely challenging. Even so-called investment gurus often get them spectacularly wrong. In January 2010 Pimco founder Bill Gross famously said “The UK

To Autumn – David Rae shares his thoughts on the Autumn Statement

  As we come to the end of this season of mellow fruitfulness The Autumn Statement and the Office for Budget Responsibility (OBR) fiscal forecasts will provide further colour on the state of the economic recovery. Given the recent downward revisions of medium term growth forecasts from the Bank Of England, we can expect similar

Dec 2, 2014 Categories: Uncategorized

De-risking – sometimes it’s good to just let go…

A welcome trend in pension funds is a steady increase in resourcing. One place where you can see it is in Russell’s recent governance survey from which the table below is taken. But while trustees may have put in place a range of resources, the same survey shows that they have not empowered those resources

Oct 23, 2014 Categories: Uncategorized

DIY buyout – for the many, not the few

With the party conference season upon us, you may well be groaning at being forced to listen to hackneyed phrases such as: “For hardworking families”; “Forward not backward”; “One nation”; “Britain can deliver”; and so on and so on. However, listening to one of these phrases, “For the many, not the few”, got me thinking

Oct 16, 2014 Categories: Uncategorized

Illiquidity: a booster engine, not concrete boots

Travelling across different countries reveals very different institutional attitudes to illiquidity. Some institutions embrace it, considering it the true advantage of long term investors; others seem to consider it akin to donning concrete boots ahead of a swimming lesson. How should pension trustees consider illiquidity? As ever, it depends on their current needs and objectives.

Oct 9, 2014 Categories: Uncategorized

Derisk your governance

Most people will agree that ivy growing over a wall is a pretty thing. But behind those pretty leaves the ivy’s grippers can break down stone, brick and mortar, and damage your home. Pension funds have metaphorically been ripping the ivy off their walls for some time, selling out of growth assets to avoid a

Oct 1, 2014 Categories: Uncategorized

The two flavours of mean reversion

Most investors are familiar with mean reversion, the idea that extremes tend not to persist, and that outstandingly good (or bad) performance tends back toward the average in time. Far fewer are familiar with the fact that there are two distinct types of mean reversion, and these two types need to be handled differently. The

Sep 25, 2014 Categories: Uncategorized

Scottish Independence is no ‘Black Swan’

By the time you are reading this blog, we will probably be less than 24 hours away from knowing the outcome of the Scottish independence referendum . It’s a yes or a no. There’s nothing in-between. The differences in consequences for pension funds, as well as others, are vast. In the jargon, this is an

Sep 17, 2014 Categories: Uncategorized

Convertible bonds: The best of both worlds?

One doesn’t need to have a mid-life crisis to own a convertible! While arguably not as exciting as a 400 horse power Porsche 911, convertibles (the bond variety) have the potential to deliver value both through diversification and return enhancement in a diversified multi-asset portfolio. A convertible bond offers the best of both the equity

Sep 11, 2014 Categories: Uncategorized

Downside protection isn’t a free lunch!

Nothing in life comes for free (well, except things like oxygen and the Metro). But my point is that most things that look too good to be true usually are, and there is often a downside to every upside – and vice versa. The same is to be said for put protection strategies. Option strategies

Aug 27, 2014 Categories: Uncategorized

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