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IAPF Annual DC Conference 2016
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DC investment trends
Ian Sykes – Willis T
- wers Watson
IAPF Annual DC Conference 2016
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DC investment trends Ian Sykes Willis T owers Watson Insert your - - PowerPoint PPT Presentation
DC investment trends Ian Sykes Willis T owers Watson Insert your - - PowerPoint PPT Presentation
DC investment trends Ian Sykes Willis T owers Watson Insert your logo here IAPF Annual DC Conference 2016 Trends Active managed Diversified growth funds funds Annuity target Flexible lifestyles Asset based Outcome based Insert your
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IAPF Annual DC Conference 2016
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What is a diversified growth fund (DGF)?
‘One stop shop’ pooled fund Broad diversification and/or active management ‘Cash plus’ objectives
Equity returns with less risk
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IAPF Annual DC Conference 2016
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Do they deliver?
Overpriced Low skill Challenging times ahead
Yes but…
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IAPF Annual DC Conference 2016
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- 50%
- 25%
0% 25% 50% Dec-2007 Jun-2008 Dec-2008 Jun-2009 Dec-2009 Jun-2010 Dec-2010 Jun-2011 Dec-2011 Jun-2012 Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Average DGF (Gross) MSCI World (GBP Hedged) UK CPI
Yes
Significant reduction in downside risk
SLIDE 6
IAPF Annual DC Conference 2016
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But…
- 25%
0% 25% 50% 75% 100% Dec-2008 Jun-2009 Dec-2009 Jun-2010 Dec-2010 Jun-2011 Dec-2011 Jun-2012 Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Average DGF (Gross) MSCI World (GBP Hedged) UK CPI
Underperform in rising markets
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IAPF Annual DC Conference 2016
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Overpriced?
- 20%
- 10%
0% 10% 20% 30% 40% 50% Dec-2007 Jun-2008 Dec-2008 Jun-2009 Dec-2009 Jun-2010 Dec-2010 Jun-2011 Dec-2011 Jun-2012 Dec-2012 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Average DGF (Gross) 60:40
Cheap passive strategy produces similar returns
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IAPF Annual DC Conference 2016
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Low skill
- 2%
- 3%
5% 100% 100%
- 20%
0% 20% 40% 60% 80% 100% 120% Additional return from idiosyncratic trades Additional return from TAA Additional return from SAA Return from 60:40 allocation DGF Return
Active management doesn’t add value
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IAPF Annual DC Conference 2016
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Challenging times
Debt overhang (50%)
- Moderate growth
- Low returns due to low rates and
low/average risk premia
- Policy rates and bond yields rise
very slowly
- Strong production-
led growth
- Good equity returns
- Bond yields rise
farther than discounted
Inflation/ bond yields Downside (40%)
Upside (10%)
- Weak growth
- Significant equity
drawdowns
- Deflation risks
- Low rates
Growth/ equity returns Bubble size indicates likelihood
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IAPF Annual DC Conference 2016
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Improvements
Go passive – cheaper but more equity risk More return sources via ‘smart beta’ (yuck…) Multi-manager – higher governance
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IAPF Annual DC Conference 2016
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Changing lifestyles
Fixed retirement age and annuity purchase Traditional cash/bond lifestyle
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IAPF Annual DC Conference 2016
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Flexibility
Fuzzy retirement and ARF option
Smart None
Multiple (e.g. Cash/Pension /ARF)
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IAPF Annual DC Conference 2016
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Jam
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IAPF Annual DC Conference 2016
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