Blue-sky thinking needed
The designers of the UK’s new personal accounts, the national pension scheme to be rolled out from 2012, have a great opportunity to shape the way pensions are delivered in future. They could challenge the pensions industry to come up with new ideas and indulge in blue sky thinking.
Or they could stick with standard industry products and hope they work. That seems to be the preferred approach of the respondents to the Personal Accounts Delivery Authority’s consultation on how to provide retirement income.
Exchange traded funds seem to be flavour of the month in mainstream asset management, but they are also becoming popular in some of the more weird and whacky corners of the online personal finance market.
Examples include DecisionMoose, which offers free access to a fairly simple asset allocation model using ETFs, and MarketRiders, which gives subscribers access to “The System”, which according to the website is “a scientific method [for building an ETF portfolio] developed by Nobel Laureates and experts and used by the investing elite, but purposely hidden by Wall Street”.
Which would you trust with your money?
Investment consultants continue to urge savers to take the risk of stock market investment when investing for their retirement.
Mick Calvert of Watson Wyatt is quoted in an interactive graphic on FT.com dealing with the pension crisis as saying:
“Strategically and looking long term, now would seem to be the time to be putting more rather than less into equity markets if its’ affordable.”
A more considered view comes from Ros Altmann, an independent pensions expert. She says: “There is no financial or economic rule that says just because you invest in the stock market you personally are going to do better than risk-free assets.”
People who want security and cannot afford to take risks would be driven to index linked gilts, or some sort of protected equity investment, she says.
Relying on the equity bet has let down many people close to retirement. Prices are lower now, but there is no expectation market volatility is a thing of the past. So what makes it safe to go back to relying on equities, and how long is the long term?
Consultants: nice to have, but not essential. That at least seems to be the message struggling financial services companies are sending, as consultants such as KPMG and PricewaterhouseCoopers find themselves with time on their hands instead of rushing to the rescue of grateful clients.
At least one firm has asked its consultants to work only three or four days a week, without mentioning it to clients, while PwC was able to find six partners free at once to have lunch with a couple of journalists this week.
UK employers want to play a game of heads I win, tails you lose, with the members of their pension schemes. They are keen, too, to draw a veil over how much they owe the schemes: perhaps they think it is not good for their share prices to be open and transparent about this.
The FT reports today on a plan put forward by the CBI, the UK employers’ body, for sweeping changes to pensions regulations. Among other things, it wants longer to make good a deficit than the 10 years currently allowed, and to move away from marking liabilities to market, which the CBI says can misrepresent a scheme’s position.
Europe’s battered fund industry is beginning to look a little less shaky as fund flows pick up in the first three months of the year. This breaks a long run of outflows after the financial crisis broke mid 2007 and then investors hit the panic button following Lehman’s collapse last autumn.
Net inflows reached €22bn as investors moved into money market funds and some of the outpourings from equity and bond funds were staunched, says quarterly research from Efama, the European fund body.
It’s time the asset management industry held boards to account for not listening to what fund managers are saying over corporate governance issues.
Lifecycle investing is still the best option for defined contribution pension savers, according to Watson Wyatt.
Fund managers are feeling bullish again, the Bank of America Merrill Lynch Fund Manager Survey reports.
Too much testosterone may have caused the banking crisis, says Anne Sibert, Professor of Economics at Birkbeck College, London, and a member of Iceland’s Monetary Policy Committee (post crash).
Imagine Dali working with Warhol
What famous artist is your asset manager? Henderson New Star’s first rebranding ad shows Salvador Dali and Andy Warhol and asks the viewer to imagine them working together.
According to Henderson’s corp comms department, there is no intention to compare either Henderson or New Star to these artists. But to the casual viewer, it’s impossible to resist trying to work out if New Star is Dali, whose pictures had images that melted hideously, creating impossible, eye-watering financial shapes, or Warhol, famous for creating multiple, different-coloured versions of every day objects, and charging extremely high prices for them.
The M&G bond team are still positive about corporate paper, although they are cautious about taking some of the extraordinarily high yields at face value.
Pimco continues its ongoing series of thoughtful articles about defined contribution retirement savings plans with a conversation with Barbara Kontje, director of the retirement plan investments at American Express Company.
Investec Asset Management’s strategist Max King has joined the swelling tide of voices declaring the beginning of a new bull market.