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In God We Trust   All Others Bring Data 100702
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In God We Trust All Others Bring Data 100702

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This is a presentation delivered to the Investment Network on Measuring the Effectiveness of DC Pensions. The premise is that you can\'t begin to judge the efficacy of plans without understanding and …

This is a presentation delivered to the Investment Network on Measuring the Effectiveness of DC Pensions. The premise is that you can\'t begin to judge the efficacy of plans without understanding and comparing actual individual member outcomes.

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  • 1. “In God we trust – all others bring data”
    Measuring the Effectiveness of DC
    02 July 2010 – The Investment Network
    Nigel Aston
  • 2. Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 3. The only game in town
    • It’s a DC world
    • 4. Evolving market
    • 5. Outcomes are what counts
    • 6. The one with the most money wins
    • 7. It’s a team game
    • 8. The journey as well as the destination
    • 9. All players can win
  • Who are the players?
  • Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 16. It’s not just the address – it’s the number of houses and hotels too
    PARTICIPANT A (‘Tim’)
    These significant differences are not captured in current processes
    PARTICIPANT B (‘Tom’)
    Good investment products do not make a good service,
    measuring outcomes is critical
  • 17. Francois Huber
  • 18. Insight from data
    If you look into a bee hive, it might look like all the bees are doing the same thing. They aren’t.
    • There are three different types of bee.
    Quantity of honey
    Quality of honey
    • Understanding different segments and underlying behaviour drives improved efficiency in the hive.
    • 19. Even within the same type, behaviour varies based on other factors, e.g. demographics, environment.
    8
  • 20. 2 years risk / return by member
    There is significant dispersion in the outcomes achieved by members, including those relying on the default strategy.
    2 Years Annualised Return
    Median Risk = 22%
    2 Years Annualised Risk (Volatility)
    Median Return = -16%
    SOURCE: PensionDCisions
    9
  • 21. Personal performance benchmarking
  • 22. Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 23. It’s not about herding – but think about the outliers
  • 24. Who are your outliers?
    Median Risk
    RETURN
    Median Return
    RISK
    FTSE PensionDCisions DC Index - Growth
  • 25. Cloud watching
  • 26. Cloud watching
  • 27. Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 28. PensionDCisions default data
    UK Product Providers
    US Plan Sponsors
    UK Plan Sponsors
    Launched in 2010:
    Launched in 2007:
    Launched in 2008:
    • 16 product providers
  • Attitudes and reliance on default
    Changes in Default Solutions
    Note: Left diagram shows only plans who responded to both the 2009 and 2010 surveys. Right diagram shows all plans in the 2010 survey.
  • 33. Measuring effects of asset allocation
    Proportion of Customised (White Labelled) Solutions UK vs. US
  • 34. Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 35. The FTSE PensionDCisions DC Index Series
    • Reflects investment decisions made
    • 36. Objective measure of asset allocation and glide path
    • 37. A target date maturity approach
    • 38. Shows risk and return throughout the lifecycle
    • 39. A new level of transparency
    • 40. FTSE PensionDCisions Growth Index Saving for retirement
    • 41. FTSE PensionDCisions 2020 Index
    • 42. FTSE PensionDCisions 2015 Index Approaching retirement
    • 43. FTSE PensionDCisions 2010 Index
    • 44. FTSE PensionDCisions At-Retirement Index At retirement
    Asset class weightings obtained from PensionDCisions “Sponsor Default Survey”
    Contains all asset classes with more than 1% aggregate weighting across the sample
  • 45. The role and position of the index series
    What is does:
    • A factual basis to understand risk and return
    • 46. A yardstick for stakeholders to calibrate decisions
    • 47. An independent platform against which consultants and asset managers can demonstrate value added
    • 48. Develops over time to incorporate other asset classes
    • 49. Reflects various points in the life cycle
    • 50. Offers a true tracking opportunity
  • The role and position of the index series
    What it doesn’t do:
    • Replace the investment objective
    • 51. Express opinion about what is right
    • 52. Encourage herding:
    • 53. Diversity is set to increase
    • 54. Monitoring risk alongside return is critical
    • 55. This index and the NEST default will be two reference points on a risk/return continuum
  • Index Series Historical Graph
  • 56. Measuring the effectiveness of DC
    The only game in town
    Play the market
    Playing safe
    The winner takes it all
    A level playing field
  • 57. Index Series Historical Graph