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Research This Quarter

Introducing Ampersand: The Latest Thinking, Tailored to Your Needs

 

Hello! & welcome to the first release from Redington Ampersand Institute (R&i).

We launched R&i at our Unconference in January 2016. The purpose was to bring a number of content lines under one roof with a crystal clear purpose and mission statement:

To share thought pieces addressing the key challenges facing pension trustees and other long term savings institutions right now, with a focus on:

– Depth & Clarity

– Context & Content

– Pioneering & Practical

The agenda will be driven by our clients, and the issues they feel are most challenging and relevant.

We view this as the next step in evolving Redington’s tradition of writing and sharing deep thought pieces on salient investment & pensions issues that we have become known for during much of the last decade (our first blog, published in 2011, is still relevant today).

I have the pleasure of being the editor & chairman of R&i during 2016. My role is to gather opinions from our clients and the industry on what these key issues are, in order to shape our content agenda.

Following some excellent feedback and input from clients at (and after) the Unconference, we’ve got a whole host of topics we want to share our thoughts on (more on that later).

For the next three months, the focus is on five themes (during February, March & April 2016).

 

  1. COLLATERAL & LEVERAGE – HOW MUCH IS THE RIGHT AMOUNT?

 

Context

Increasingly we hear from trustees who have taken the decision to extend their LDI programs and increase their hedge ratio in order to protect their scheme from falling interest rates. Using modern day LDI techniques, this doesn’t mean all the assets need be invested in gilts or “matching” assets, but trustees are well aware that prudent collateral must be held against unfunded exposures.

But what is the right amount?

And what amount of assets are left over to pursue investment returns to close the deficit?

We’ve got some very clear thoughts on this issue. In this paper we hope to lay out our recommended frameworks for making these decisions and measures for judging safe amounts of collateral and leverage.

 

  1. CASH IS KING

 

Context

Following Mette Hansen’s talk at the Unconference, we received a lot of feedback that this was an interesting and relevant topic for schemes and trustees. With the likelihood of central clearing becoming a reality in the not-too-distant future, it seems probable that schemes will need to set aside larger amounts in liquid and easily accessible cash than they have done in the past.

But what are the implications for investment strategy and will this affect returns?

In this paper, we will share our thoughts on how strategic asset allocations can change to incorporate higher levels of liquid cash, without compromising return objectives.

 

  1. GOVERNANCE – DELEGATING AUTHORITY, RETAINING CONTROL AND ACHIEVING BETTER OUTCOMES FOR MEMBERS

 

Context

Schemes are often interested in our experiences on projects we have worked on to improve governance arrangements.

Robin Claessens (Managing Director in our consulting team and former CIO of the Invensys pension scheme) will share his learnings on how schemes can best organise the various stakeholders and advisors to delegate authorities whilst retain oversight and control, and ultimately improve outcomes for members.

He will also present a compelling alternative to fiduciary management, which we believe can often have inherent conflicts.

 

  1. THE EVOLUTION OF EQUITY ALPHA AND WHAT IT MEANS FOR ACTIVE EQUITY PORTFOLIOS TODAY

 

Context

 

We’ve received a lot of interest in Nick Samuels’ (our Head of Equities) Unconference talk where he unveiled his thoughts on equity alpha.

Specifically, on how the concept has changed through time, including the role of smart beta, and quantitative systematic strategies.

He concluded with an inconvenient truth; there are too many active equity managers and too many researchers following them.

In this piece, Nick will go into more detail on the consequences for actively managed equity portfolios today – how many managers should you have? Which styles and regions are most important? And what fees should you be paying?

 

  1. DC – WHAT’S THE RIGHT DEFAULT INVESTMENT STRATEGY?

 

Context

 

Many clients feel their DC default strategy is a little out of date.

As is often the way, there’s good news and bad news.

The good news is the availability of a huge variety of strategies and managers to choose from when building diversified portfolios for each stage of DC.

The bad news is twofold; the effect of the charge cap and the additional constraints caused by the operational practicalities of DC.

In light of this, new Head of DC and Financial Wellbeing, Lydia Fearn, will reveal our thoughts on the right investment strategies to deliver outcomes that DC members need.

And this is just the beginning.

We’ll be looking to cover more topics later in the year, including:

 

  • sequencing risk in investing,
  • an integrated framework for longevity and investment risk,
  • our approach to “endgame” solutions, and
  • the role of property in diversified portfolios.

 

It’s certainly a packed agenda! The team and I are really looking forward to sharing these pieces with you over the coming months.

 

Do get in touch using the form below to sign up for emails or share feedback. We’d love to hear from you!

 

Dan Mikulskis

2016 R&i Editor & Chair

 


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