The document provides an introduction to investments and covers key concepts such as risk and return, asset classes, diversification, and inflation. It explains that higher risk investments like shares and property have historically delivered higher returns than lower risk investments like cash and fixed interest. It emphasizes the importance of diversification across different asset classes and managers to reduce risk.
This document defines key investment terms related to objectives, risks, asset classes, and strategies. It discusses basic investment goals, factors to consider when choosing investments, and types of risk like financial, market, interest rate, and purchasing power risk. It also outlines rates of return calculations, capital gains advantages, diversification methods, common stock valuation measures, and real estate investment concepts. Fixed income investments, options, futures, and bonds are also defined.
SIM is a philosophically grounded, multi-specialist, multi-product asset manager within the Sanlam group. It has one investment platform that leverages off the Sanlam book and brand. SIM provides asset management services through various specialist teams across multiple asset classes.
This document provides an introduction to derivatives. It has four main goals: 1) introduce risk and the role of derivatives in managing risk, 2) discuss general finance terms, 3) introduce three major classes of derivatives (forwards, futures, options), and 4) introduce how these securities are analyzed and the major traders. It defines derivatives as financial instruments whose value depends on underlying variables. The document discusses the basics of risk, positions (long/short), commissions, bid-ask spreads, and market efficiency. It provides an example of Disney using earthquake bonds to transfer risk from shareholders to bondholders.
New Oak Creating An Effective Risk Modeling Framework (Pensions Risk Manage...Ron D'Vari
The document discusses various approaches to liability driven investing (LDI), including:
1) Different styles of LDI ranging from basic cash-flow matching to more sophisticated asset allocation strategies. Effective LDI also requires ongoing risk management and reporting.
2) Modern portfolio theory that ignores liability risks, while LDI focuses on optimizing relative to liability benchmarks and measuring inter-temporal risk relative to liabilities.
3) The impact of market conditions on LDI, as liability benchmarks outperform in down markets but market benchmarks work better in up markets, influencing sponsor preferences and contributions.
This document presents an uncommon approach to financial decision making using a living balance sheet framework. It summarizes that traditional needs/goal planning has problems, is inefficient and requires guesswork. Instead, it advocates assessing a client's full financial picture including assets, liabilities, protection, and cash flow to achieve optimal financial balance. The living balance sheet approach provides tools to gather client data, offers strategic solutions, and creates action steps to implement decisions for improved long-term financial results.
Participating Life Insurance - Balancing To Reduce RiskLawrence Cole
This document summarizes the benefits of participating life insurance as a unique asset class. It notes that participating life insurance provides guaranteed cash value growth, tax advantages on cash value growth, flexibility of access to cash value, and a tax-free life insurance benefit. The document highlights London Life's participating account, which provides professionally managed investments, low expenses, and historically strong and stable returns compared to other asset classes. An example shows how participating life insurance can outperform taxable investments on both cash value and death benefits over a 20-45 year period. The document promotes participating life insurance as a way to enhance net worth and estate value through its blend of benefits.
The document discusses why investors underperform in the market. It notes that individual investors are prone to behavioral biases and emotional decision making that cause them to make suboptimal investment choices. In contrast, institutional strategies focus on asset allocation across diverse asset classes and maintaining a consistent strategy over the long term, which has been shown to produce better risk-adjusted returns. The document advocates that investors should focus on asset allocation and maintaining a consistent strategy rather than reacting emotionally to short-term market fluctuations.
The document provides an overview of the DSP BlackRock MIP Fund, a hybrid fund that invests 75-100% of assets in debt and money market securities and 0-25% in equities. It aims to generate income from its debt allocation while also providing capital appreciation potential from its equity exposure. The fund analyzes macroeconomic factors to dynamically allocate between asset classes and focuses on high credit quality, liquid debt instruments to generate risk-adjusted returns. It is suitable for investors looking for dividend income and price appreciation over a 12-month horizon.
This document defines key investment terms related to objectives, risks, asset classes, and strategies. It discusses basic investment goals, factors to consider when choosing investments, and types of risk like financial, market, interest rate, and purchasing power risk. It also outlines rates of return calculations, capital gains advantages, diversification methods, common stock valuation measures, and real estate investment concepts. Fixed income investments, options, futures, and bonds are also defined.
SIM is a philosophically grounded, multi-specialist, multi-product asset manager within the Sanlam group. It has one investment platform that leverages off the Sanlam book and brand. SIM provides asset management services through various specialist teams across multiple asset classes.
This document provides an introduction to derivatives. It has four main goals: 1) introduce risk and the role of derivatives in managing risk, 2) discuss general finance terms, 3) introduce three major classes of derivatives (forwards, futures, options), and 4) introduce how these securities are analyzed and the major traders. It defines derivatives as financial instruments whose value depends on underlying variables. The document discusses the basics of risk, positions (long/short), commissions, bid-ask spreads, and market efficiency. It provides an example of Disney using earthquake bonds to transfer risk from shareholders to bondholders.
New Oak Creating An Effective Risk Modeling Framework (Pensions Risk Manage...Ron D'Vari
The document discusses various approaches to liability driven investing (LDI), including:
1) Different styles of LDI ranging from basic cash-flow matching to more sophisticated asset allocation strategies. Effective LDI also requires ongoing risk management and reporting.
2) Modern portfolio theory that ignores liability risks, while LDI focuses on optimizing relative to liability benchmarks and measuring inter-temporal risk relative to liabilities.
3) The impact of market conditions on LDI, as liability benchmarks outperform in down markets but market benchmarks work better in up markets, influencing sponsor preferences and contributions.
This document presents an uncommon approach to financial decision making using a living balance sheet framework. It summarizes that traditional needs/goal planning has problems, is inefficient and requires guesswork. Instead, it advocates assessing a client's full financial picture including assets, liabilities, protection, and cash flow to achieve optimal financial balance. The living balance sheet approach provides tools to gather client data, offers strategic solutions, and creates action steps to implement decisions for improved long-term financial results.
Participating Life Insurance - Balancing To Reduce RiskLawrence Cole
This document summarizes the benefits of participating life insurance as a unique asset class. It notes that participating life insurance provides guaranteed cash value growth, tax advantages on cash value growth, flexibility of access to cash value, and a tax-free life insurance benefit. The document highlights London Life's participating account, which provides professionally managed investments, low expenses, and historically strong and stable returns compared to other asset classes. An example shows how participating life insurance can outperform taxable investments on both cash value and death benefits over a 20-45 year period. The document promotes participating life insurance as a way to enhance net worth and estate value through its blend of benefits.
The document discusses why investors underperform in the market. It notes that individual investors are prone to behavioral biases and emotional decision making that cause them to make suboptimal investment choices. In contrast, institutional strategies focus on asset allocation across diverse asset classes and maintaining a consistent strategy over the long term, which has been shown to produce better risk-adjusted returns. The document advocates that investors should focus on asset allocation and maintaining a consistent strategy rather than reacting emotionally to short-term market fluctuations.
The document provides an overview of the DSP BlackRock MIP Fund, a hybrid fund that invests 75-100% of assets in debt and money market securities and 0-25% in equities. It aims to generate income from its debt allocation while also providing capital appreciation potential from its equity exposure. The fund analyzes macroeconomic factors to dynamically allocate between asset classes and focuses on high credit quality, liquid debt instruments to generate risk-adjusted returns. It is suitable for investors looking for dividend income and price appreciation over a 12-month horizon.
The document provides an overview of the Integrity with GFD solution, a new wealth accumulation and protection solution for business owners. It addresses main challenges business owners face like not having enough money for retirement or rewarding family. The Integrity solution offers accelerated wealth accumulation, additional life insurance protection, and significant tax advantages. It works by providing an upfront loan that is deposited into a universal life insurance policy to grow tax-deferred. Business owners can then enjoy multiple exit strategies like selling the business, using it for retirement income, or leaving a financial legacy.
REIT preferred stocks provide an alternative source of income with several potential benefits:
1) They offer attractive dividends that are generally well-covered by the cash flows of underlying REIT issuers.
2) Historically, REIT preferreds have low correlations to other asset classes, offering portfolio diversification.
3) Currently, REIT preferreds yields are near historic highs compared to 10-year Treasury yields, suggesting the potential for outsized returns if spreads revert back toward historical averages.
A New Arrow for The Pension Practitioners Quiver: Pension Risk TransferJay Dinunzio
Webinar Presentation Slides
Gone are the days of group annuity contracts only being able to satisfy the plan termination objectives of a pension plan sponsor. Today, there are a wide variety of useful applications for guaranteed institutional annuity contract structures to provide an alternative to traditional fixed income investments. Are you or your pension clients:
•Struggling with cost and volatility issues surrounding a defined benefit pension plan?
•Considering a liability driven investment strategy that will de-risk the plan investment and allow for stable, predictable funding?
•Limited by fixed income funds that only allow for simple duration matching, and expose the plan to cash flow mismatch risks?
•Unaware of the variety of customized institutional insurance contract structures available?
•Lacking a fiduciary process for evaluating and monitoring the attractiveness of insured pension solutions?
Features of a Captive Insurance Strategy CBIZ, Inc.
A captive insurance company allows businesses to minimize risk mitigation costs by recapturing underwriting profits usually earned by commercial insurers. It provides broader coverage than commercial insurance, including risks that are hard to insure. Using a captive insurance strategy can reduce insurance costs by 30-40% by allowing businesses to deduct premiums paid and retain investment income. Captives provide flexibility in coverage options and claims control processes.
This document discusses using an enterprise risk management (ERM) approach to managing personal wealth in volatile markets. It argues that ERM provides a natural conceptual framework for building and protecting wealth. The key pillars of ERM - strategic focus, natural hedging, risk exploitation, and catastrophe protection - can form the basis for successfully managing investments. Applying these pillars involves customizing an investment strategy around unique financial objectives, diversifying across uncorrelated asset classes, employing informed risk-taking, and using portfolio protection against major market shocks.
This document discusses credit risk economic capital modeling. It provides an overview of the role of bank capital in absorbing unexpected losses while maintaining solvency. It then interprets Basel 2's capital equation, which incorporates factors like the Vasicek model, correlation, expected loss (EL), and tenor adjustment. The document introduces a model that follows Basel's approach while also using simulation to measure economic capital (EC). It discusses key applications of EC in areas like risk governance, external communication, and internal management. EC reflects a bank's risk appetite by indicating how much unexpected loss the bank is willing to absorb with its capital reserves.
The document discusses Four Springs Capital's investment strategy in net-leased real estate and energy assets. It summarizes FSC's capabilities in structuring special purpose entities like LLCs and DSTs for 1031 exchanges and real estate ownership. The management team is experienced in private equity, asset management, and energy investment banking. FSC believes energy prices have dropped to attractive entry levels for producing mineral interests, royalties, and volumetric production payments with stable cash flows.
The document provides an overview of mutual funds in India. It discusses:
- The Association of Mutual Funds in India (AMFI) is the umbrella body that regulates mutual funds in India.
- There are over 900 mutual fund schemes in India managing over Rs. 5 lakh crore in assets as of 2008, showing strong growth since the 1980s.
- Mutual funds pool money from investors and invest it in a variety of securities like stocks, bonds, money market instruments based on the scheme's investment objective. Returns are shared by investors proportionate to their investment.
The Scheme is an open ended income scheme, seeking to generate income, consistent with prudent risk, from a portfolio which is substantially constituted of quality debt securities.
ACG European Capital Tour Pamela Hendrickson and Dominique GaillardACGEU
ACG European Capital Tour; views and perspectives on French and US private equity. Pamela Hendrickson COO the Riverside Company, Dominique Gaillard, Board member AXA Private Equity
The document discusses current challenges in structuring domestic portfolios. It notes money market outflows in Q2 2012 while unit trusts saw inflows. Balanced funds have been outperforming due to their diversification, flexibility, and strong equity and fixed income teams. The core PSG funds range from high to low risk. The philosophy is to be consistent, conservative, and contrarian in investments. Portfolios are constructed based on moats, management, and margin of safety analysis of companies. Current portfolio themes include offshore, mid-cap domestic industrials, large-cap industrials and resources.
Economic capital Management Experience SharingEric Kuo
1. Economic capital is used to gauge unexpected loss in a bank's credit portfolio by taking into account diversification and concentration effects.
2. Key applications of economic capital include risk governance to determine a bank's risk appetite, internal capital allocation, and external communication with regulators and investors.
3. Implementing and promoting the use of economic capital faces challenges of encouraging buy-in from regulators, rating agencies, and analysts through ongoing communication.
This document summarizes a presentation on pricing variable annuity guaranteed living benefits given in 2009. It discusses how recent market trends have impacted pricing, including large losses announced by insurers, increased reserves, and changes to VA product designs. It also examines factors affecting pricing, such as lower interest rates, higher volatility, increased hedging costs, and higher asset correlations. The presentation argues that pricing assumptions may need to be adjusted to account for these changes in the economic environment.
Подход к IR с позиции специалиста по рынкам акционерного капиталаRTS Stock Exhange
The document discusses improving the standard IPO process through a more balanced and collaborative approach between issuers and investors. It proposes broader and deeper marketing that maps over 380 investors, with fewer overlaps in bank coverage. This would lead to more accurate pricing, greater liquidity, and wider research coverage through a focus on education and transparency throughout the process.
Torus is a global specialty insurer with operations in 10 countries and specialized ventures including Lloyd's Syndicate 1301. They offer customized insurance products for industries like energy, construction, aviation, and healthcare. For healthcare clients, Torus believes in compensating injuries fairly while rewarding safe practices. They provide tools to customize coverage like swing plans, premium discounts, and split retentions tailored to a client's risks and claims history. The goal is providing appropriate coverage at the lowest cost to allow clients to focus on patient care.
This document discusses the current phase of the "Great Liquidation and Great Litigation" and opportunities for distressed credit investors. It outlines that the current phase is playing out on an even larger scale than previously described, providing many attractive investment opportunities. Experience navigating past credit cycles, creativity, credibility, and strong execution abilities are key to successfully investing across the credit spectrum. The greatest returns can be achieved by those with extensive experience, the right investment structure, and sufficient resources to identify and capitalize on idiosyncratic opportunities globally.
Model Term Sheet For Alliance Of Angels Finaltepatton
From veteran Dan Rosen. This is a very useful guide on a term sheet that is relatively common in angel investing. Good general guide although terms vary by region and angel group.
The document discusses a private equity style approach to investing in public markets called Avenir Capital. It summarizes Avenir's strategy of seeking undervalued securities trading well below their intrinsic value with a large margin of safety. Avenir aims to generate superior long-term returns while minimizing the risk of permanent capital loss. It applies three pillars: focusing on downside risk first, fundamental bottom-up analysis, and targeting absolute rather than relative returns. Avenir is managed by an experienced investor and has an incentive fee structure aligned with investors.
The Investec Opportunity Fund aims to produce dependable inflation-beating returns while minimizing the risk of capital loss. It uses a multi-asset approach investing in equities, property, bonds and cash both domestically and offshore. The fund focuses on high quality individual holdings selected through a bottom-up process. It targets returns that exceed inflation by 6% over 3 to 5 years at lower risk than traditional balanced funds.
investment strategies to grow your income. How much risk can you subject your investments to? How much can
you afford to lose in the near future? Remember that most forms of
investment have risk associated with them. Simply pick investment
instruments that match your risk tolerance.
The document provides an overview of the Integrity with GFD solution, a new wealth accumulation and protection solution for business owners. It addresses main challenges business owners face like not having enough money for retirement or rewarding family. The Integrity solution offers accelerated wealth accumulation, additional life insurance protection, and significant tax advantages. It works by providing an upfront loan that is deposited into a universal life insurance policy to grow tax-deferred. Business owners can then enjoy multiple exit strategies like selling the business, using it for retirement income, or leaving a financial legacy.
REIT preferred stocks provide an alternative source of income with several potential benefits:
1) They offer attractive dividends that are generally well-covered by the cash flows of underlying REIT issuers.
2) Historically, REIT preferreds have low correlations to other asset classes, offering portfolio diversification.
3) Currently, REIT preferreds yields are near historic highs compared to 10-year Treasury yields, suggesting the potential for outsized returns if spreads revert back toward historical averages.
A New Arrow for The Pension Practitioners Quiver: Pension Risk TransferJay Dinunzio
Webinar Presentation Slides
Gone are the days of group annuity contracts only being able to satisfy the plan termination objectives of a pension plan sponsor. Today, there are a wide variety of useful applications for guaranteed institutional annuity contract structures to provide an alternative to traditional fixed income investments. Are you or your pension clients:
•Struggling with cost and volatility issues surrounding a defined benefit pension plan?
•Considering a liability driven investment strategy that will de-risk the plan investment and allow for stable, predictable funding?
•Limited by fixed income funds that only allow for simple duration matching, and expose the plan to cash flow mismatch risks?
•Unaware of the variety of customized institutional insurance contract structures available?
•Lacking a fiduciary process for evaluating and monitoring the attractiveness of insured pension solutions?
Features of a Captive Insurance Strategy CBIZ, Inc.
A captive insurance company allows businesses to minimize risk mitigation costs by recapturing underwriting profits usually earned by commercial insurers. It provides broader coverage than commercial insurance, including risks that are hard to insure. Using a captive insurance strategy can reduce insurance costs by 30-40% by allowing businesses to deduct premiums paid and retain investment income. Captives provide flexibility in coverage options and claims control processes.
This document discusses using an enterprise risk management (ERM) approach to managing personal wealth in volatile markets. It argues that ERM provides a natural conceptual framework for building and protecting wealth. The key pillars of ERM - strategic focus, natural hedging, risk exploitation, and catastrophe protection - can form the basis for successfully managing investments. Applying these pillars involves customizing an investment strategy around unique financial objectives, diversifying across uncorrelated asset classes, employing informed risk-taking, and using portfolio protection against major market shocks.
This document discusses credit risk economic capital modeling. It provides an overview of the role of bank capital in absorbing unexpected losses while maintaining solvency. It then interprets Basel 2's capital equation, which incorporates factors like the Vasicek model, correlation, expected loss (EL), and tenor adjustment. The document introduces a model that follows Basel's approach while also using simulation to measure economic capital (EC). It discusses key applications of EC in areas like risk governance, external communication, and internal management. EC reflects a bank's risk appetite by indicating how much unexpected loss the bank is willing to absorb with its capital reserves.
The document discusses Four Springs Capital's investment strategy in net-leased real estate and energy assets. It summarizes FSC's capabilities in structuring special purpose entities like LLCs and DSTs for 1031 exchanges and real estate ownership. The management team is experienced in private equity, asset management, and energy investment banking. FSC believes energy prices have dropped to attractive entry levels for producing mineral interests, royalties, and volumetric production payments with stable cash flows.
The document provides an overview of mutual funds in India. It discusses:
- The Association of Mutual Funds in India (AMFI) is the umbrella body that regulates mutual funds in India.
- There are over 900 mutual fund schemes in India managing over Rs. 5 lakh crore in assets as of 2008, showing strong growth since the 1980s.
- Mutual funds pool money from investors and invest it in a variety of securities like stocks, bonds, money market instruments based on the scheme's investment objective. Returns are shared by investors proportionate to their investment.
The Scheme is an open ended income scheme, seeking to generate income, consistent with prudent risk, from a portfolio which is substantially constituted of quality debt securities.
ACG European Capital Tour Pamela Hendrickson and Dominique GaillardACGEU
ACG European Capital Tour; views and perspectives on French and US private equity. Pamela Hendrickson COO the Riverside Company, Dominique Gaillard, Board member AXA Private Equity
The document discusses current challenges in structuring domestic portfolios. It notes money market outflows in Q2 2012 while unit trusts saw inflows. Balanced funds have been outperforming due to their diversification, flexibility, and strong equity and fixed income teams. The core PSG funds range from high to low risk. The philosophy is to be consistent, conservative, and contrarian in investments. Portfolios are constructed based on moats, management, and margin of safety analysis of companies. Current portfolio themes include offshore, mid-cap domestic industrials, large-cap industrials and resources.
Economic capital Management Experience SharingEric Kuo
1. Economic capital is used to gauge unexpected loss in a bank's credit portfolio by taking into account diversification and concentration effects.
2. Key applications of economic capital include risk governance to determine a bank's risk appetite, internal capital allocation, and external communication with regulators and investors.
3. Implementing and promoting the use of economic capital faces challenges of encouraging buy-in from regulators, rating agencies, and analysts through ongoing communication.
This document summarizes a presentation on pricing variable annuity guaranteed living benefits given in 2009. It discusses how recent market trends have impacted pricing, including large losses announced by insurers, increased reserves, and changes to VA product designs. It also examines factors affecting pricing, such as lower interest rates, higher volatility, increased hedging costs, and higher asset correlations. The presentation argues that pricing assumptions may need to be adjusted to account for these changes in the economic environment.
Подход к IR с позиции специалиста по рынкам акционерного капиталаRTS Stock Exhange
The document discusses improving the standard IPO process through a more balanced and collaborative approach between issuers and investors. It proposes broader and deeper marketing that maps over 380 investors, with fewer overlaps in bank coverage. This would lead to more accurate pricing, greater liquidity, and wider research coverage through a focus on education and transparency throughout the process.
Torus is a global specialty insurer with operations in 10 countries and specialized ventures including Lloyd's Syndicate 1301. They offer customized insurance products for industries like energy, construction, aviation, and healthcare. For healthcare clients, Torus believes in compensating injuries fairly while rewarding safe practices. They provide tools to customize coverage like swing plans, premium discounts, and split retentions tailored to a client's risks and claims history. The goal is providing appropriate coverage at the lowest cost to allow clients to focus on patient care.
This document discusses the current phase of the "Great Liquidation and Great Litigation" and opportunities for distressed credit investors. It outlines that the current phase is playing out on an even larger scale than previously described, providing many attractive investment opportunities. Experience navigating past credit cycles, creativity, credibility, and strong execution abilities are key to successfully investing across the credit spectrum. The greatest returns can be achieved by those with extensive experience, the right investment structure, and sufficient resources to identify and capitalize on idiosyncratic opportunities globally.
Model Term Sheet For Alliance Of Angels Finaltepatton
From veteran Dan Rosen. This is a very useful guide on a term sheet that is relatively common in angel investing. Good general guide although terms vary by region and angel group.
The document discusses a private equity style approach to investing in public markets called Avenir Capital. It summarizes Avenir's strategy of seeking undervalued securities trading well below their intrinsic value with a large margin of safety. Avenir aims to generate superior long-term returns while minimizing the risk of permanent capital loss. It applies three pillars: focusing on downside risk first, fundamental bottom-up analysis, and targeting absolute rather than relative returns. Avenir is managed by an experienced investor and has an incentive fee structure aligned with investors.
The Investec Opportunity Fund aims to produce dependable inflation-beating returns while minimizing the risk of capital loss. It uses a multi-asset approach investing in equities, property, bonds and cash both domestically and offshore. The fund focuses on high quality individual holdings selected through a bottom-up process. It targets returns that exceed inflation by 6% over 3 to 5 years at lower risk than traditional balanced funds.
investment strategies to grow your income. How much risk can you subject your investments to? How much can
you afford to lose in the near future? Remember that most forms of
investment have risk associated with them. Simply pick investment
instruments that match your risk tolerance.
How to reduce portfolio risk through periodic re-balancing. The impact of dividends on total portfolio return. Thoughts on Social Security’s future.
Investment Styles: Large growth versus large value
For more information contact: emailus@marcusevans.com
Roger Gray, the Chief Investment Officer at USS Ltd. shared his presentation entitled "Implementing a Long-Term Investment Philosophy" at the European Pensions and Investment Summit.
Join the 2015 Summit along with leading regional pension investors and global asset managers in an intimate environment for a focused discussion of key new drivers shaping institutional investment strategies today.
For more information contact: emailus@marcusevans.com
Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC, an independent broker/dealer, and are not insured by FDIC, NCUA or any other financial institution insurance, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal. Raymond James is not affiliated with the financial institution or the investment company. Material prepared by Raymond James for use by its advisors.
REIT Preferred Securities Historical Spread To The 10 Year TreasuryForward Management
The yield spread between REIT preferred securities and 10-year Treasuries remains wide at 605 basis points despite price gains in REIT preferreds in 2009. This spread is still higher than the long-term average of 430 basis points. While REIT preferreds have appreciated, visibility on common stock dividends remains limited. REIT preferreds offer higher yields of around 10% along with the potential for further spread narrowing and capital gains as the economy recovers.
The document provides an introduction to the F&C Lifestyle Funds, which are whole of market, risk-rated multi-manager funds designed for financial adviser use. The funds combine risk profiling with multi-manager asset allocation across equities, fixed income, property and cash. Each fund invests in 15-30 underlying funds from multiple managers to provide diversification. The funds are actively managed by Thames River Capital to match the volatility target for the client's risk profile. Rebalancing ensures the funds remain aligned to the client's risk level over time without tax liability from underlying fund sales.
The document discusses the principles of structured investing based on decades of financial market data and Nobel Prize-winning research. It advocates taking a structured approach that does not try to beat the market through timing but rather captures market returns through broad diversification. The approach focuses on investing in stocks, emphasizing small companies and value stocks, as academic research has found these risks are worth taking for higher expected returns over the long term. While these risks may increase short-term volatility, long-term data demonstrates that stocks have significantly outperformed other asset classes like bonds.
Northwestern Mutual's permanent life insurance policies offer financial security for policyholders' beneficiaries. The company takes a unique long-term investment approach, allocating assets across various classes like bonds, stocks, and real estate to generate higher returns with less risk than alternatives. This balanced portfolio has allowed Northwestern Mutual to achieve above-average returns of 8.24% annually from 1990-2009 while experiencing lower volatility than stock-only investments.
This document discusses leverage in hedge funds. It defines leverage as using borrowed capital to amplify returns. While leverage can boost returns when asset prices rise, it also amplifies losses when prices fall. The author believes leverage is a valid tool when used judiciously but cautions against using too much leverage to boost low-return strategies. Typical leverage levels vary by strategy from 1x to 6x of gross assets. Analyzing balance sheets and understanding strategies is important for evaluating appropriate leverage levels.
The document is a cheat sheet for hedge funds. It provides summaries of key information about hedge funds in 3 sentences or less:
1) The first page summarizes common characteristics of hedge funds, who invests in them, and why investors may choose hedge funds for diversification, downside protection, and an absolute return focus.
2) Page 2 defines differences between hedge funds and mutual funds, such as flexibility, paperwork requirements, liquidity, and an absolute vs. relative return focus. It also summarizes reasons to invest in hedge funds.
3) Page 3 summarizes common hedge fund fees including an annual management fee typically between 1-2% of assets and an incentive fee usually 20% of profits
Adam Sues outlines an investment strategy focused on deep value stocks, mispriced special businesses, and event-driven investments. The strategy seeks balance sheet bargains trading below asset value, stable businesses with sustainable competitive advantages selling at a discount to normal earnings, and special situations with a clear catalyst for intrinsic value realization. Key metrics for deep value include low debt and positive retained earnings, while metrics for special businesses include stable margins and high returns on capital. Event-driven investments aim to earn stable, uncorrelated returns from mergers, bankruptcies, and other time-bound opportunities.
This document discusses how to construct a diversified portfolio using simplified modern portfolio theory. It begins by explaining key concepts like asset classes, risk, return and how diversification can reduce risk through dilution and interference. It then outlines major asset classes like shares, property, fixed interest and cash. It explains how a portfolio constructed of multiple asset classes can achieve superior risk-adjusted returns compared to holding single assets. The document provides examples of how allocating among shares, property and bonds from different countries over time achieved better returns with less volatility than holding any one asset class. It emphasizes regularly rebalancing a portfolio to maintain the desired asset allocation. Overall, the document provides a concise overview of basic portfolio construction principles.
Financial planning is a long-term process of managing one's finances to achieve goals. It provides a roadmap to financial health and sustainable wealth creation. Financial planning is needed to manage finances for goals, have emergency cash, determine capital structure, maximize returns while minimizing risk, and defer taxes. Common excuses for not planning include lack of money, thinking insurance and retirement are unnecessary when young, and prioritizing education over retirement. The financial planning process involves measuring financial health, setting goals, determining risk profile, and deciding investment areas. This document provides details on assessing financial health, setting goals, common investment types like equity, debt, real estate, and gold, and tips for financial planning.
This document summarizes a presentation on pricing guarantees for variable annuities given recent market conditions. It discusses how lower interest rates, lower expected equity returns, and higher realized volatility are challenging pricing assumptions. Many insurance companies have had to increase reserves, accelerate write-offs, and modify products with higher fees or reduced guarantees due to losses. Hedging guarantees is also very difficult in this environment of increased volatility, basis risk, and funding costs. Proper pricing now requires considering economics rather than just accounting impacts.
This document discusses financial planning during tough economic times. It notes that stock markets are down 70% and investors have lost confidence, leading to job cuts that further reduce demand. This creates an unstable environment with an uncertain future. The document advises checking three parameters: goals and objectives, risk appetite, and time horizon. It suggests different investment options depending on the time horizon and risk tolerance. Having insurance can help protect goals and dreams against uncertainties. The right financial advice can help people sleep better.
Bandon Isolated Alpha Fixed Income (Presentation)bandonfunds
Bandon Isolated Alpha Fixed Income Fund seeks to deliver alternative fixed income returns through a diversified portfolio of global absolute return strategies. The fund aims for returns of 6-8% net of fees with limited volatility of 3-5% standard deviation through various credit and interest rate strategies run by specialized sub-advisers. Logan Circle Partners and Dix Hills Partners implement the credit and interest rate strategies, respectively, through proprietary research and risk management processes. The fund has exhibited low correlation to traditional fixed income and ability to perform well in rising rate and risk asset stress environments since its inception in late 2010.
Sense and nonsense in modern corporate f inanceSanjay Bakshi
Buffett believes that traditional notions of risk taught in corporate finance are flawed. True risk is the probability of losing purchasing power over an investment's holding period, not just volatility. High volatility does not necessarily mean high risk if the long term prospects are good. He also believes risk and return are not directly correlated, noting it is riskier but more rewarding to buy undervalued assets.
This document discusses key concepts in value investing, including:
1. It defines who a value investor is and the three main types: passive screeners, contrarian investors, and activist value investors.
2. It outlines some perceived flaws in modern value investing strategies, calling them rigid, righteous, and ritualistic.
3. It discusses myths around discounted cash flow valuation and the role of beta in measuring risk. While beta is an imperfect measure, it is useful for measuring relative and macroeconomic risk.
4. It notes that more research does not necessarily decrease risk, as value investors still face macroeconomic and other risks outside of their control.
CMC is a global steel and metals company with over 14,000 employees worldwide. It manufactures, recycles, markets, and distributes steel and metal products through a network of over 200 locations globally. CMC operates steel minimills, fabrication plants, service centers, and recycling facilities. It aims to be vertically integrated and diversified in its product offerings and geographic reach.
The document provides an overview of CMC's business model which focuses on vertical integration, product diversification, and global geographic dispersion. It then discusses CMC's current market conditions and outlook across different geographic regions and product lines, including details on earnings expectations, capital investment projects, and quarterly financial statistics. The document also reviews factors influencing costs and selling prices for CMC's various steel manufacturing operations in North America.
The document provides an overview of CMC, a global steel and metals company. It discusses CMC's business model which focuses on vertical integration, product diversification, and global geographic dispersion. It also summarizes CMC's track record of conservative management and 30 consecutive years of profitability. Finally, it outlines CMC's five operating segments and overall strategy of achieving a global reach through regional focus and growth in key markets.
CMC is a global steel and metals company with over 14,000 employees worldwide. It manufactures, recycles, markets, and distributes steel and metal products through a network of over 200 locations globally. CMC operates steel minimills, fabrication plants, service centers, and recycling facilities. It aims to vertically integrate its operations from scrap processing to steel fabrication to provide a hedge against steel and metal price fluctuations.
The document provides an overview of CMC's business model, current market conditions, earnings results, and operational metrics for the third quarter of 2008. It discusses CMC's strategy of vertical integration, product diversification, and global geographic dispersion. It also reviews earnings, sales, margins, capital investments, and performance across CMC's different business segments.
The document provides an overview of CMC's business model, current market conditions, earnings results, and operational metrics for the third quarter of 2008. It discusses CMC's strategy of vertical integration, product diversification, and global geographic dispersion. It also reviews demand trends, input costs, earnings, investments, segment performance, and operational details.
This document provides an overview of Commercial Metals Company (CMC) and its quarterly performance. It discusses CMC's business model, including its vertical integration and product and geographic diversification. It also summarizes CMC's financial performance from 2003-2007, highlighting increasing sales, earnings, and shareholder returns over that period. Current market conditions and CMC's outlook are briefly addressed.
The document provides an overview of CMC's business model and current market conditions for the 4th quarter of 2008. It summarizes CMC's key business segments, product lines, capital projects, financial statistics, and discusses challenges in the global steel market including falling prices, reduced demand, and excess inventory. It analyzes factors such as raw material costs, sales prices, margins, and operating profits across CMC's divisions.
The document provides an overview of CMC's business model and current market conditions for the 4th quarter of 2008. It summarizes CMC's key business segments, current projects, liquidity position, financial statistics, and discusses challenges in the global steel market including falling prices, reduced demand, and excess inventory. It analyzes performance and outlook for CMC's Americas and international operations.
This document summarizes notes from the 4th Annual Global Steel CEO Forum held by Goldman Sachs on December 4, 2008. It discusses the current challenging market conditions for the steel industry due to the global liquidity crisis, including falling prices, production cutbacks, and declining demand. Updates are provided on conditions and outlook for different markets, including further price declines and inventory reductions in North America, continued cutbacks and oversupply in Europe and the Middle East, and China's efforts to stimulate domestic demand and infrastructure spending to boost its economy and steel demand. Breaking the negative cycle depends on the effectiveness of global government intervention programs and restoration of confidence.
The document discusses how Commercial Metals Company (CMC) is different from other steel companies. It notes that CMC focuses on long steel products, has diversified its business across five segments including steel mills, fabrication, recycling, and marketing, and has a track record of consistent profitability and financial strength over 26 years. The document aims to show investors that CMC's strategy and performance set it apart from other steel industry firms.
The document discusses how Commercial Metals Company (CMC) is different from other steel companies. It notes that CMC focuses on long steel products, has diversified its business across five segments including steel mills, fabrication, recycling, and marketing, and has a track record of consistent profitability and financial strength over 26 years. The document aims to show investors that CMC's strategy and performance set it apart from other steel industry firms.
The document discusses how Commercial Metals Company (CMC) is different from other steel companies. It notes that CMC focuses on long steel products, has diversified its business across five segments including steel mills, fabrication plants, recycling, and marketing/distribution, and has a track record of consistent profitability and financial strength over 26 years. The document aims to show shareholders that CMC's business strategy and performance set it apart from other steel industry firms.
This document is Commercial Metals Company's 2005 Annual Report. It summarizes the company's financial performance for fiscal year 2005, including record net earnings of $286 million on net sales of $6.6 billion, up from $132 million on $4.8 billion the previous year. It discusses positive results across the company's business segments, including Domestic Mills, Domestic Fabrication, Recycling, and Marketing & Distribution. The annual report also provides an overview of the company's operations, strategic focus on vertical integration, and capital expenditure plans.
This document is the 2005 annual report for Commercial Metals Company. It summarizes the company's financial performance for fiscal year 2005, which saw record net earnings of $286 million on net sales of $6.6 billion, up from $132 million on $4.8 billion the previous year. The company's domestic mills and fabrication segments significantly outperformed the prior year due to higher steel prices and strong end-user demand. While operations in Poland saw a decline from the prior year, performance improved in the fourth quarter. Overall, the company benefited from favorable market conditions across most of its businesses.
This document is Commercial Metals Company's 2005 Annual Report which summarizes the company's financial performance for fiscal year 2005. Some key points:
- The company achieved record net earnings of $286 million on record net sales of $6.6 billion in fiscal year 2005, up from $132 million in net earnings on $4.8 billion in net sales in fiscal year 2004.
- All of the company's business segments - Domestic Mills, Domestic Fabrication, Recycling, and Marketing & Distribution - experienced strong financial performance and profitability in 2005.
- The company continued its strategy of vertical integration and diversification which has helped it perform well in changing market conditions.
- For
This annual report summarizes Commercial Metals Company's financial performance in fiscal year 2006. Some key points:
- Record net earnings of $356 million on $7.6 billion in net sales, up from $286 million on $6.6 billion the prior year.
- All five business segments (domestic mills, CMCZ, domestic fabrication, recycling, and marketing/distribution) performed well due to favorable market conditions and the company's vertical integration strategy.
- Domestic mills set new records for sales, production, and shipments as metal spreads increased. The copper tube mill's operating profit increased significantly year-over-year.
This annual report summarizes Commercial Metals Company's financial performance in fiscal year 2006. Some key points:
- Record net earnings of $356 million on $7.6 billion in net sales, up from $286 million on $6.6 billion the prior year.
- All five business segments (domestic mills, CMCZ, domestic fabrication, recycling, and marketing/distribution) performed well due to favorable market conditions and the company's vertical integration strategy.
- Domestic mills set production and shipment records while benefiting from high metal spreads. CMCZ also improved significantly through organizational changes and new investments.
Commercial Metals Company reported record financial results for fiscal year 2006 with net sales of $7.6 billion, net earnings of $356 million, and diluted earnings per share of $2.89. All five of CMC's business segments performed well, with domestic steel mills, CMCZ (the Polish steel operation), and recycling being especially strong. Market conditions were favorable, especially for non-residential construction, and CMC executed well. The company also invested in new facilities, acquisitions, and branding initiatives. CMC has high confidence in its future due to the continued expected strength of its end markets and its vertically integrated business model.
Commercial Metals Company had a profitable year in 2007, approaching the record profits of 2006. The company made several strategic acquisitions, announced plans to build a new micro mill, and reorganized internally to take advantage of growth opportunities. All five of the company's business segments performed well. Safety remains a major focus.
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
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STREETONOMICS: Exploring the Uncharted Territories of Informal Markets throug...sameer shah
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Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
Vicinity Jobs’ data includes more than three million 2023 OJPs and thousands of skills. Most skills appear in less than 0.02% of job postings, so most postings rely on a small subset of commonly used terms, like teamwork.
Laura Adkins-Hackett, Economist, LMIC, and Sukriti Trehan, Data Scientist, LMIC, presented their research exploring trends in the skills listed in OJPs to develop a deeper understanding of in-demand skills. This research project uses pointwise mutual information and other methods to extract more information about common skills from the relationships between skills, occupations and regions.
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OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
South Dakota State University degree offer diploma Transcriptynfqplhm
办理美国SDSU毕业证书制作南达科他州立大学假文凭定制Q微168899991做SDSU留信网教留服认证海牙认证改SDSU成绩单GPA做SDSU假学位证假文凭高仿毕业证GRE代考如何申请南达科他州立大学South Dakota State University degree offer diploma Transcript
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Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
2. Introduction to investments
Risk and return
Asset classes
Defensive and growth assets
Asset class performance
Managing risk through diversification
Index and active investment
The impact of inflation
This module explains many of the fundamental investment concepts like risk and return,
asset classes, diversification, and inflation.
2
3. The basic investment tradeoff – risk versus return
Emerging
markets
Higher risk,
higher return
SHARES
Medium risk,
medium return
Return
PROPERTY
Lower risk,
lower return
FIXED INTEREST
(or bonds)
CASH
Money
in bank
Risk
The fundamental investment principle is that you can only earn a higher return if you take
more risk. To put this another way, if you want to reduce your risk, you must be prepared
to accept a lower return. For example, if you put all your money in the bank, your return
will probably be very low but you have the comfort of knowing that the amount you
deposited will always be there.
On the other hand, if you put all your money into emerging markets, your return could be
very high for one or two years, then very low and quite possibly negative the next. In other
words, your returns, particularly over the short term, are likely to be very volatile.
Neither of these investments is necessarily right or wrong. Whether you invest your
money in cash, fixed interest, property or shares depends on what type of investor you
are – more conservative or more aggressive. This depends on things like your age,
income, savings and personal preferences.
3
4. Asset classes
AGGRESSIVE
Shares
ASSERTIVE
• Part ownership
• Capital gain + dividends
BALANCED • Potentially very risky
Property • Highest average
Return
long-term returns
CAUTIOUS • Access to range of property
• Listed property trusts
• Capital gain + rent
CONSERVATIVE • Potentially risky investment
Fixed interest
• A ‘loan’ agreement
Cash • Interest plus principal
• Instant access, security • Price reflects interest rates
• Low return BUT low risk • Lower risk / lower returns
• Short-term timeframe
• Interest but no capital gain
• No inflation protection
Risk
The main asset classes are cash, fixed interest, property and shares. The Aon Master Trust also
invests in alternative assets (for example in its sector options).
Cash offers instant access to your money, a high level of security and, historically, the lowest
return of all asset classes. It is usually the best option when you have a very short investment
timeframe and you want a stable return. Although cash is considered to be a very low-risk
investment, it offers little protection against inflation.
Fixed interest or bonds are a loan agreement between a borrower and a lender. Fixed interest
investors receive regular interest payments plus their original investment at maturity date. Bond
prices fluctuate according to movements in interest rates. If interest rates rise, then bond prices fall
and vice versa. Although bond prices fluctuate, they are generally less volatile than property or
share prices and for this reason they usually offer a lower return.
Property trusts allow smaller investors to pool their money and invest in large-scale,
professionally-managed property assets. Property trusts offer capital appreciation from rising
property values and income from rent. Property can be a risky investment because property prices
fluctuate. Property trusts that are listed on the share market are not only subject to movements in
property prices but also to movements in the share market itself.
Shares provide investors with the potential for capital gain from rising share prices and income
from dividends. Share prices can also fall so share investors must be prepared for the chance of
short-term losses. Over the long term, however, shares have delivered the highest average returns.
Alternative assets typically include hedge funds, private equity and infrastructure. Hedge funds
use specialist investment strategies to trade shares and fixed interest assets. Private equity
investments are made in companies not listed on a stock exchange. Infrastructure investments
include utilities and other physical assets. These funds aim to achieve positive returns in both rising
and falling markets and are typically included in diversified portfolios to reduce exposure to risk
over longer time frames.
Superannuation funds tend to invest in the main asset classes in different proportions so that
generally speaking, all types of investors – from the more conservative to the more aggressive –
will find a suitable investment option.
4
5. Defensive and growth asset classes
Asset class performance
10 yrs to 31 Dec 08 (% pa)
7.5%
7.0%
6.2%
5.8%
2.5%
Defensive assets Growth assets
0.0%
-2.0%
Cash Aust fixed Int’l fixed Listed Aust Int’l
interest interest property shares shares
The asset classes are broadly divided into defensive or income assets and growth
assets.
Defensive assets include cash and fixed interest investments. They’re called defensive
because their returns are generally more stable than growth investments. All the return
from cash is in the form of interest. There are no capital gains, and therefore no capital
losses, on cash. You can make a capital gain from some longer-term fixed interest
investment such as government bonds, but the regular interest payments are still the
main attraction of fixed interest investments for most investors.
Growth assets include shares and property and they are called growth assets because
historically, the bulk of their return has come from increases in their price. They also
provide some income in the form of dividends from shares and rent from property, but this
is typically a smaller proportion of the total return over the long term.
Over the long term, growth assets tend to offer a higher return than defensive assets,
which reflects the increased risk of investing in shares and property. This higher return
can make a big difference to long-term investments like superannuation. The weak
performance of growth assets over the 10 years to 31 December 2008 reflects the great
uncertainty stemming from the global financial crisis of 2008.
Please note that past performance should not be considered a guide to future
performance.
This graph uses the following market indices:
Australian shares: S&P/ASX 200
International shares: MSCI World ex-Australia index in A$
Listed property: S&P/ASX 300 Listed Property Trust Accumulation Index
Australian fixed interest: UBS Composite Bond Index
Global fixed interest: Citigroup World Govt bond Index hedged in A$
Cash: UBS Bank Bill Index
5
6. Asset class performance (value of $1,000)
Markets are affected by political and economic events and ups and downs are a fact of
life for investment returns.
This graph shows the performance of the different asset classes over the 20-year period
31 December 1988 to 31 December 2008.
The share and property markets have had a bumpy ride while the cash and fixed interest
markets have been comparatively stable.
The strong bull market in Australian shares and property in the early years of this century
reversed dramatically as the global financial crisis emerged in 2007 and 2008.
Please note that past performance should not be considered a guide to future
performance.
This graph uses the following market indices:
Australian shares: S&P/ASX 200
International shares: MSCI World ex-Australia index in A$
Listed property: S&P/ASX 300 Listed Property Trust Accumulation Index
Australian fixed interest: UBS Composite Bond Index
Global fixed interest: Citigroup World Govt bond Index hedged in A$
Cash: UBS Bank Bill Index
6
7. You just can’t pick it
This year’s winner
could be
next year’s loser
Investors are constantly reminded that past returns are no guarantee of future returns.
This graph shows how a market can go from best to worst performer, or from worst to
best, in just 12 months. It can be a real roller-coaster ride - look at Australian shares
between 1990 and 1994.
The lessons here are:
this year’s winner could be next year’s loser
trying to pick the winners is a risky practice
spreading or diversifying your money across different investments reduces that risk and
helps smooth investment returns.
Please note that past performance should not be considered a guide to future
performance.
This graph uses the following market indices:
Australian shares: S&P/ASX 200
International shares: MSCI World ex-Australia index in A$
Listed property: S&P/ASX 300 Listed Property Trust Accumulation Index
Australian fixed interest: UBS Composite Bond Index
Global fixed interest: Citigroup World Govt bond Index hedged in A$
Cash: UBS Bank Bill Index
7
8. Growth assets can mean volatility
41.6%
Minimum and maximum returns 45.4%
1988 - 2008 34.0%
24.7%
20.1%
18.4%
4.8%
-2.6%
-4.7%
-27.4%
-38.4%
-55.3%
Cash Aust fixed Int fixed Listed Australian International
interest interest property shares shares
People tend to concentrate solely on return when they are evaluating their investment
options. But the RISK of the investment, which refers to the extent to which returns
fluctuate from year to year, is equally important.
The chart shows the highest and lowest returns recorded by the major asset classes over
the 20-year period December 1988 to December 2008. The volatility, as indicated by the
difference between the highest and lowest returns, is clearly evident. Cash is the least
volatile but tends to offer the lowest return while shares offers the highest potential
returns but are the most volatile. In the third quarter of 2008, highly-geared listed
Australian property securities continued to feel the fallout of the credit crisis - this is
reflected in the worst single-year return over this 20-year period.
The lesson for investors in all this is to think about what’s more important to you – the
opportunity to earn higher returns and the likelihood of a bumpy ride, OR more stable but
lower returns and a good night’s sleep.
Please note that past performance should not be considered a guide to future
performance.
This graph uses the following market indices:
Australian shares: S&P/ASX 200
International shares: MSCI World ex-Australia index in A$
Listed property: S&P/ASX 300 Listed Property Trust Accumulation Index
Australian fixed interest: UBS Composite Bond Index
Global fixed interest: Citigroup World Govt bond Index hedged in A$
Cash: UBS Bank Bill Index
8
9. Types of investment risk (volatility)
Mismatch Legislative Diversification
The investment you Your investment could All your capital could be
choose may not be be affected by changes affected if you invest in
suitable for your needs in current laws and a single asset class
and circumstances regulations
Inflation
Credit
INVESTMENT The purchasing power
Your interest payments
of your money may not
or your capital may not
RISK match inflation
be repaid
Liquidity Interest rate Market
You may not be able to Your expected income Investment markets
access your money might not be available if might move suddenly
quickly or without cost interest rates move and unfavourably
when you need to unfavourably
There is no single type of investment risk. Rather, there are many different types of risk
that together make up investment risk.
For example, you may choose investments that aren’t suitable for your particular
circumstances, sometimes called mismatch risk. Then there’s the risk you may not get
your money back, or you may not be able to get it quickly, or legislation might change,
interest rates could go up or down, you may not have spread or diversified your
investments sufficiently, inflation could erode your purchasing power, or investment
markets might move unfavourably.
As an investor, you’ll never be able to avoid these risks entirely but with the right advice,
they can be managed.
9
10. Managing risk through diversification
Diversified
investment
Investment A
Return
Investment B
Diversification
1. Across asset classes
2. Within asset classes
3. Across managers and manager styles
Years
Years
Even professional investment managers cannot accurately predict the future direction of
investment markets. So rather than take a bet on which asset class will perform best, a
better strategy is to spread your money across all the different investment types. In this
way, you will reduce the impact that a poor performance in one particular sector will have
on your overall return. The theory says that by diversifying your investments, you will
benefit from some investment ‘ups’ while avoiding the worst of the ‘downs’.
There are a number of ways to diversify your investments. You can spread your money
across asset classes – for example, by putting some money in both shares and cash.
There are different sectors within the share market such as banks, mining, retail, food
and household goods and so on. There are also different share market managers who
have different investment styles so you can spread your investment across managers as
well.
The whole idea of all this spreading or diversification is to make sure that if one asset
class, or individual investment or individual investment manager doesn’t work out, then all
isn’t lost because you had all your eggs in the one basket.
10
11. Pre-mixed investment options
HIGH GROWTH
Growth 100%
GROWTH
Defensive 15%
Growth 85%
BALANCED
Return
Defensive 30%
Growth 70%
CAPITAL STABLE
Defensive 70%
Growth 30%
Growth assets Defensive assets
SECURE Australian shares Aust. fixed interest
Defensive 100% International shares Int’l fixed interest
Property Cash
Alternative Alternative
Risk
One way to make sure your investment is diversified is to invest in a pre-mixed
investment option. Pre-mixed investments typically hold a mix of defensive and growth
assets.
The pie charts show the strategic asset allocations for the Aon Master Trust’s
Pre-mixed investment options:
• Secure and Capital Stable hold a greater proportion of defensive assets.
• Balanced, Growth and High Growth hold a greater proportion of growth assets.
Please note that actual allocations may vary from strategic allocations.
Most investors, regardless of whether they are more conservative or more aggressive,
will usually find a pre-mixed option suitable for their particular investment profile.
11
12. Index and active investment
Index
– seeks to track performance of relevant index
– sometimes known as ‘passive’
– typically a lower-cost approach.
Active
– uses research, active portfolio management and trading
strategies to outperform benchmark
– typically a higher-cost approach than index.
Major considerations when investing include how a fund manager can add value to
exceed an underlying market index or benchmark, the risk undertaken by the manager,
and the management fees.
Index fund managers seek to track the performance of a stock index. For example, the
Australian Shares – Index option is designed to closely match the performance of the
S&P/ASX 200 Accumulation Index for Australian shares. Index managers typically charge
less than active managers. See also Understanding performance – an outline of how
performance has been affected by the 2008 credit crisis in ways you may not expect.
Active fund managers aim to outperform their benchmark by using research, active
portfolio management and trading strategies. There is a risk, especially over short time
horizons, that an active manager may underperform the relevant market index. Active
fund managers typically charge more for taking this approach, but believe potential
improved investment performance will justify the cost.
12
13. Inflation – a powerful enemy
IMPORTANT
From an investment
point of view, the
$100
quot;realquot;, after-inflation
$90
return is the most
Purchasing power
$80 important because
this figure determines
$70
what your money will $67.30
$60 buy
Rate of
$50
$45.60
inflation
$40
2%
$31.18
$30
4%
$21.45
$20 6%
$10 8%
$0
1 5 10 15 20
Years
Inflation is the rise in the price of goods and services and if it is not managed properly, it
has the potential to undo much of the good groundwork laid down by compound interest
and regular saving.
If the price of goods and services rises faster than your income, both your purchasing
power and your standard of living will fall.
Inflation in Australia has been relatively low in recent years, compared to the high inflation
rates of the 1970s and 1980s. Over the 10-year period to September 2008 inflation has
averaged just over 3% per annum. But no one can predict where inflation will go in the
future.
One way to offset the impact of inflation is to have at least some of your money in growth
assets such as shares. This is because the price of growth assets, like the price of any
asset, tends to move in line with the general rise in prices, so the rate of inflation will also
boost the performance of growth assets. From an investment point of view, the ‘real’,
after-inflation return is the most important because this figure determines what your
money will buy. In Australia we use the Consumer Price Index (CPI) to measure inflation.
13