Dynamic Investment Strategies for Corporate Pension Funds in the Presence of Sponsor Risk

 This publication, produced as part of the BNP Paribas Investment Partners research chair on asset-liability management and institutional investment management at EDHEC-Risk Institute, shows that sophisticated dynamic allocation strategies can usefully be implemented by pension funds. One of the key findings of the paper is to show that imposing a cap on the funding ratio, in addition to a floor, has a positive impact on both pensioners and bondholders, while only having a minor negative effect on equity value

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Principles for the Regulation of Exchange Traded Funds - IOSCO

The International Organization of Securities Commissions (IOSCO) Consultation Report titled “Principles for the Regulation of Exchange Traded Funds” (CR05/12, March 2012) was prepared by IOSCO Technical Committee Standing Committee on Investment Management (TCSC5).
The report presents what it describes as “proposed common investor-protection principles or guidelines on Exchange Traded Funds (ETFs)” and “touches on certain market structure and financial stability issues.”

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Please click here to read EDHEC-Risk Institute comments of the paper

Platinum Metals Review - July 2012

The Platinum Metals Review - July 2012

A quarterly journal of research on the science and technology of the platinum

group metals and developments in their application in industry

is now available. Please click here to download

Global Financial Markets - Working Papers on

A Belke, A Freytag, J Keil… - 2012

Abstract: Monetary policy rules have been considered as fundamental protection against
inflation. However, empirical evidence for a correlation between rules and inflation is
relatively weak..

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FT Adviser : Morning paper

Morning papers: Bleak jobs outlook raises heat on the Fed...

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Pension Research Council YouTube channel

Pension Research Council posted several videos  to the Pension Research Council YouTube channel on the following subjects:  

• The 2012 Pension Research Council Symposium, "The Market for Retirement Financial Advice" 
• The 2012 Pension Research Council Special Forum, "Saving Pensions: What can the US and UK Learn from Each Other?"

Check it out!

No Bank is an Island- get global before globalisation get you

Today’s performance woes, combined with the quest for sustainable growth, are pushing
banks beyond geographic and product centric boundaries.

Globalization is the single greatest opportunity – and yet also the greatest threat – facing the industry today. Over 40 percent of 644 bankers around the world cite expansion to global markets as their single biggest growth opportunity. Shifts in customer trends and new collaboration strategies will spell new prospects, particularly for those with a clear strategy to act promptly and decisively. However, this path is not without its challenges. With global interdependencies on the rise, many banks are struggling to deal with a credit crisis gone global and with aggressive new competitors.

In the IBM survey (url attached), conducted in cooperation with Economist
Intelligence Unit, the effects of globalization on the retail banking industry is examined.

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The Ernst & Young Financial Services Index: 1st Quarter 2008

The Ernst & Young Financial Services Index (E&Y FSI) tumbled 14 index points – from 98 in the last quarter of 2007, to 84 in 08Q11,2. This is the first time in five years (since 03Q4) that the index is below its long term average of 88.

Since the previous survey, the following developments most likely contributed to reduced financial sector confidence:

• The prime overdraft rate was increased for an eighth time in December 2007. Retail banks now face a further rise in nonperforming

loans and declining demand for new loans from individuals (and some businesses).

• The implosion of the sub-prime mortgage market in the USA led to stress in financial markets, which in turn led to a major

decline in credit and withdrawal of some financial instruments. As a result, financial market uncertainty and volatility surged
world wide. These developments affected South African financial institutions adversely in several ways:
- Investment banking activity plummeted3.
- Investment managers saw a big drop in net inflows, probably as investors switched from equity investments to safer
havens, such as bank deposits and contractual investments4.
- Falling net inflows and fluctuations in the value of funds under management dampened income growth of investment
managers. This development hurt small managers disproportionately more than large managers.
- Life insurers experienced a big fall in investment income growth.

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2007 Annual Survey of Retirement Benefits in South Africa

The 2007 Sanlam Survey was conducted among principal officers of retirement funds. Respondents were selected at random to represent small (<100>South Africa. These included pension and provident funds structured on a defined contribution basis, as well as umbrella funds.

The survey recorded a 100% response rate with a total of 200 funds responding.

Highlights

• In the past year, the amount of employee and employer contributions to pension funds has fallen by almost a full percent per year, with the total provision for retirement now at only 11.3 percent per year, the study reveals.

• Only 10.5 percent of retirement funds have a formal investment policy to invest a proportion of assets in socially responsible investment (SRI) portfolios.

• Almost 60 percent of funds are considering paying for financial education of members to address the perceived lack of understanding of the information provided to members.

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KPMG and SAVCA Private Equity Survey- May 2007

The results of the KPMG and SAVCA ‘Venture Capital and Private Equity Industry Performance Survey’ for 2006 conclude that the private equity industry represents a significant sector within the overall financial services industry, and is an attractive asset class within the broader capital markets.

Compiled from 44 private equity fund managers representing 71 funds, the survey data confirms that 2006 was a watershed year for the industry, with record activities across all measurement criteria, including fund raising, investment and exit activity. The survey, covering the 2006 calendar year, provides a vital summary of performance highlights and provides insights into current trends and forecasts of the industry, as well as comparisons to historical data and global trends.

South African investors are beginning to understand that private equity provides positive absolute returns and significant portfolio diversification benefits.

75% of funds raised last year were from offshore investors, of which half were from the US, contributing to the US overtaking Europe as the highest provider of foreign funds to the SA.

The South African industry improved fund raising drive last year has caused funds under management to surge to R56, 2bn at the end of 2006 compared with R42, 5bn in 2005.

Overtures from foreign private equity houses are confirmation of the stability of the SA political system, macroeconomics, a sound banking system, a functional regulatory system and, good economic growth prospects.

Black economic empowerment (BEE) remains a major source of activity in the industry with investment in entities that are black owned empowered or influenced up 23% from R3.1 billion during 2005 to R3.8 billion during 2006.Funds returned to investors increased by R18, 4bn from R4bn during 2005 to R22, 4bn during 2006.

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Mine – Riding the wave-

The PwC survey titled Mine – Riding the wave, provides an aggregated view of the global mining industry in 2006, represented by 40 of the world’s largest mining companies.

Some of the highlights from the report

• The impact of hedge funds on the mining industry has been felt dramatically in the last two years, through their involvement in metal trading activities and the volatility this creates in commodity prices.
• With rising commodity prices, acquisitions that are cash funded lead to a rapid payback and 69% of major acquisitions in 2006 were funded this way. Cash is also being used to fund organic growth.
• The lack of good quality projects in “safe” areas is leading to exploration and development efforts in jurisdictions that have until recently been considered marginal.
• The pure “taxes” that governments levy on mining companies are only part of the story. A more accurate picture of the total contribution to government and the community by industry participants needs to emerge for the real position to be understood.

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2007 Global Powers of Retailers

This report by Deloitte identifies the 250 largest retailers around the world based on
publicly available data for the companies’ fiscal year 2005 (ended July 1, 2005-June 30, 2006). The report
also provides an outlook for the global economy; an analysis of market capitalization in the industry; and a
discussion of major challenges facing today’s retailers.


Highlights

• Although the global economy has begun to show some signs of stress, fiscal 2005 proved to be another healthy year for the

world’s leading retailers. Total retail sales for the Top 250 reached $3.01 trillion, up 6.0% from last year’s Top 250 total
of $2.84 trillion. Year-over-year growth, based on this year’s list of companies only, proved even more robust, with an 8.8%
increase over the group’s prior-year sales of $2.76 trillion.

• The ten largest retailers continue to capture market share.

These retail powerhouses (six US companies and four European companies) reported combined sales of $885 billion in fiscal 2005,
or 29.4% of total Top 250 retail sales. This represents a robust 11.7% gain over their 2004 results, mostly as the result
of continued strong organic growth.

• The Africa/Middle East region has five companies among the Top 250. All are based in South Africa. Metcash Trading

(Africa) has dropped from # 81 in 2004 to #230 in this year’s ranking, having sold its Australasian operations to Metcash
Group.

• Although international sales are becoming increasingly important to many large retailers’ growth strategies, foreign

operations still account for only 14.4% of the Top 250 companies’ retail sales, on average, up 1.8 percentage points
from 12.6% in 2000.

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Survey on Effective management of SA Retirement Funds

The March 2007 PwC report represents the responses of 110 chairpersons from a wide spread of retirement funds from very large to fairly small with assets totalling over R80 billion.

The survey also compares the South African survey results with an equivalent PwC survey completed in the UK a year ago.

Key survey findings

• In general, funds are managed in accordance with the specific rules of the funds as well as with applicable legislation. Most trustee boards believe that they are up to date with all legislative requirements, but most of them indicate that they have not assessed compliance with the King II principles of corporate governance.

• Although most funds are aware of the importance of good governance, only a third have a formal governance mandate that is used for steering management processes and decision making.

• Only 14% of funds have not considered conflicts of interest. However, only 15% have a formal policy in place to identify conflicts. 75% of funds with assets under R500 million each have not considered a process for managing conflicts of interest.

• Although 85% of funds have considered the performance assessment of their advisers, the process of assessment can be improved. 37% of funds assess performance of advisers on an ad hoc basis only that is not standardised. 9% of funds do not assess their advisers at all. 55% of advisers are selected either on criteria that are subjective, or after informal debate and without any review.

• The survey also shows that on the management of defined contribution funds, SA funds are well advanced. They give considerable thought to the range of investment options they offer members. They also put considerable effort into communicating the risk/return relationships taking into account members’ risk profiles

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Top Women money managers- Annie Yates

	Financial Mail 22 June 2007

One of the most experienced women in fund management, on both the sell-side and the buy-side and now head of business development at RMB. In the early 1980s it was still unusual for company management to deal with female analysts, especially pregnant ones. But Yates says that the various stockbrokers and fund managers she has worked for have always been supportive. After a stint as a journalist at The Star she was persuaded to join stockbrokers Mathison & Hollidge, which was keen to build up its female analyst base. " I was notionally working half days when my children were young, but was more productive than some colleagues who were working a full day." Yates believes portfolio management, unlike some other jobs, does not lend itself to working from home. Financial Mail: Asset Managers