Search This Blog

Sunday, 19 September 2010

Lifecycle Pension Funds - The Question

When it comes to retirement, I do not believe that most people want to invest in some type of lifecycle pension fund if that fund is worth an uncertain future value at age 65 or 70. 

Would savers have peace of mind that they have the financial wherewithal to live their retirement years in financial security and comfort if, for example, they have been primarily invested in bonds and cash instruments? Well, it depends on their particular circumstances and the timing of these particular portfolio allocations. 

Stocks, bonds, real estate, private equity, commodities, cash and hedge funds have all generated attractive returns in different time periods.  However, which asset classes will generate attractive returns in which years is a key issue to deal with. The years and the returns (or losses) can vary considerably.  For example, in 2001, real estate and hedge fund returns were a helpful offset to a dismal year for stocks and commodities.  In 2003, stocks and private equity had strong gains in comparison with those of bonds.  However, in 2008, government bonds and cash were the only places to be for positive returns as the financial crisis hit with full force against all the other major asset classes. 

Questions regarding what the future may bring in terms of inflation, market performances, currency movements, personal health circumstances, etc., all have an important impacts on the size of the pension nest egg that will be needed for savers to feel assured that their financial needs will be met in retirement as a result of their decades of personal savings and investments.

We will examine this in more detail in future blogs.

Thursday, 9 September 2010

Introduction to AssetAllocation Plus - The Blog Begins

Asset allocation is the first step in any investment process. It is a vital element as it sets the stage for any portfolio's return and risk profile.

Academic studies have shown that more than 90% of variability in investment performance can be attributed to asset allocation.  Decisions concerning asset mix have a greater impact on a portfolio's overall investment results that individual security selection or market timing.

Multi-asset, multi-market and multi-style can be combined to produce portfolios that can be constructed to be strategically actively managed within client-determined risk ranges.

In this blog I will explore a wide range of traditional (stocks, bond and cash instruments) and alternative (hedge funds, private equity, real estate, commodities, currencies, timberland, etc) asset classes, markets, styles and strategies.

I am open and flexible regarding the mix of components that can be used as it depends on client investment objectives, risk tolerances, income requirements and liquidity needs.  I believe that getting market exposure through cheap and efficient building blocks such as ETFs, index funds and futures are valuable tools in the portfolio construction and risk management process, especially when combined with active alpha generators.

Keeping up with economic, market and political factors are important in trying to anticipate what could happen and by developing strategies that reflect those views.  We certainly do have our opinions, views and strategies.

I hope you enjoy reading and interacting with this blog and welcome your feedback.