Liability-Driven Investment - From Analogue to Digital, Pensions to Robo-Advice

Understand the investment template that dominates the pension industry
 
Liability-Driven Investment is the practitioner's guide to this increasingly popular investment template. Already the dominant framework for pension schemes in Europe and the UK, the LDI market is expected to grow significantly with the shift from Defined Benefit to Defined Contribution, and then into Digital Asset Management -- or Robo-Advice. With an aging population and significant under-saving globally, more and more finance professionals will need to know how to work within and around the LDI framework; this book provides clear explanations for the framework's usefulness and growing popularity to help practitioners find their bearings in and around the LDI space.
 
The ultimate goal of LDI is to move beyond simple asset value maximisation and ensure that investors have sufficient funds to pay liabilities. This informative guide digs into that basic premise to show the various mechanisms, guidelines and practices that make up the framework's "working parts."
* Discover the optimal investment strategies in multiple assets classes
* Understand the key characteristics of the instruments used, including bonds, interest rate derivatives, and inflation linked products
* Learn why pension companies and individual investors are moving toward LDI
* Explore the ways in which the explosive growth of Robo-Advice will change retail investment
 
Finance professionals have long been accustomed to shifting landscapes -- it is taken as a given that prevailing thought and attendant practices will change over time -- but the rapid expansion of LDI has taken many by surprise. Having already been established as the dominant framework for pensions, it is clear that the emphasis on LDI will only continue to grow. Liability-Driven Investment tells you what you need to know in order to work effectively with LDI.

Table des matières

Preface xi
 
CHAPTER 1 Liability-Driven Investment and Multi-Asset Class Investing 1
 
Moving Beyond Modern Portfolio Theory: Introducing the World of Liability-Driven Investment 1
 
The Cult of Equity 6
 
The Pension Protection Fund 7
 
Summary 13
 
CHAPTER 2 Introduction to Investment Risk 15
 
Risk Management 18
 
The Importance of Risk vs Return 18
 
Quantifying Risk 19
 
Systematic and Nonsystematic Risk 19
 
Creating A Risk Profile 20
 
Summary 21
 
Some Basic Rules of Investment Risk 21
 
CHAPTER 3 Introductory Steps into the World of Multi-Asset Class Investment 23
 
Some Handy Definitions 25
 
The Starting Point 26
 
Introducing Modern Portfolio Theory 27
 
More Handy Definitions 29
 
But How Does the Asset Allocation Decision work? 30
 
Home Country Bias: 32
 
Developing a Strategy for Multiple Asset Classes 33
 
Handy Definitions 34
 
Quick Aside: 36
 
Summary 36
 
CHAPTER 4 Building Investment Portfolios 39
 
(Fundamental, Technical and Quantitative Techniques) 39
 
An Introduction to Single Stock Selection 40
 
The Types of Analysis 40
 
Fundamental Analysis of Securities 41
 
Introducing Ratio Analysis 42
 
Liquidity and Solvency Ratios 43
 
Current Ratio 43
 
The Quick Ratio or Acid Test 43
 
Cash Ratio 44
 
Financial Leverage or Debt Ratios 44
 
Technical Analysis of Securities 45
 
The Main Assumptions of Technical Analysis 46
 
Quantitative Analysis 47
 
Passive Investors 48
 
The Passive vs Active Debate 48
 
Introducing the Efficient Market Hypothesis 48
 
So Why Use Active Managers? 51
 
So Passive or Active? 56
 
Summary 57
 
CHAPTER 5 Building Investment Portfolios 59
 
Choosing the Manager 61
 
Moving on to Operational Due Diligence 63
 
A Sample (Non-Exhaustive) List of Operational Checks 63
 
Quick Aside: Replicating Private Equity and a Passive Venture Capital Fund 65
 
Part 3 Portfolio Selection 69
 
CHAPTER 6 Moving Towards Liability Driven Investing 73
 
The Time Value of Money 73
 
More Extreme than the Extreme 76
 
The Basics Continued: Real Versus Nominal Discounting 77
 
A Simple and Brief Look at Bonds 78
 
Some Other Types of Bonds 79
 
How to Price a Bond 80
 
Key Terms 80
 
Immunisation Theory and Frank Redington 81
 
An Introduction to Interest Rate Swaps 82
 
What Is an Interest Rate Swap? 83
 
The Mechanics 83
 
Some Terms Used in the Market 83
 
A Quick Aside: Forward Rate Agreements (FRAs) 84
 
An Introduction to Inflation-Linked Securities 85
 
Why Do Governments Issue Inflation-Linked Bonds? 87
 
The Basic Mechanics 88
 
Inflation-Linked Swaps 89
 
The Global Market 90
 
Payers vs Receivers 91
 
The Zero-Coupon Swap 91
 
CHAPTER 7 The Defined Benefit Pension Plan and Explicit Liabilities 93
 
The Boots Example 95
 
The Stakeholders in a Typical Plan 97
 
A Checklist for Trustees 97
 
What Are the Liabilities? 98
 
CHAPTER 8 ESG, Governance and the Pensions Industry 101
 
The UN PRI 103
 
The Increasing Importance of ESG 105
 
What Does ESG Represent? 106
 
The Main Approaches to Ethical Investing 107
 
Screening and Beyond 107
 
ESG: A Screening Approach 108
 
Implementing a S

A propos de l'auteur

DAN TAMMAS-HASTINGS has over 20 years experience in the financial markets. He is the CEO and founder at the Asset Management and Digital Advice firm RiskSave. He founded the company in 2015, in response to inadequate risk measures and a lack of transparency dominating the financial services industry. After a successful career as a fixed income trader specialising in GBP derivatives at Merrill Lynch and as a hedge fund manager, managing multi-billion-pound portfolios across credit and rates, he now writes on various issues within investment and risk management and is in charge of strategy and investment at RiskSave as well as advising other investment and technology firms. Dan has been awarded both the CFA and FRM charters, and is a graduate of the London School of Economics and the University of Cambridge.

Résumé

Understand the investment template that dominates the pension industry

Liability-Driven Investment is the practitioner's guide to this increasingly popular investment template. Already the dominant framework for pension schemes in Europe and the UK, the LDI market is expected to grow significantly with the shift from Defined Benefit to Defined Contribution, and then into Digital Asset Management -- or Robo-Advice. With an aging population and significant under-saving globally, more and more finance professionals will need to know how to work within and around the LDI framework; this book provides clear explanations for the framework's usefulness and growing popularity to help practitioners find their bearings in and around the LDI space.

The ultimate goal of LDI is to move beyond simple asset value maximisation and ensure that investors have sufficient funds to pay liabilities. This informative guide digs into that basic premise to show the various mechanisms, guidelines and practices that make up the framework's "working parts."
* Discover the optimal investment strategies in multiple assets classes
* Understand the key characteristics of the instruments used, including bonds, interest rate derivatives, and inflation linked products
* Learn why pension companies and individual investors are moving toward LDI
* Explore the ways in which the explosive growth of Robo-Advice will change retail investment

Finance professionals have long been accustomed to shifting landscapes -- it is taken as a given that prevailing thought and attendant practices will change over time -- but the rapid expansion of LDI has taken many by surprise. Having already been established as the dominant framework for pensions, it is clear that the emphasis on LDI will only continue to grow. Liability-Driven Investment tells you what you need to know in order to work effectively with LDI.

Détails du produit

• Auteurs: D Tammas-Hastings, Dan Tammas-Hastings
• Edition: Wiley, John and Sons Ltd
• Langues: Anglais
• Format d'édition: Livre Relié
• Sortie: 30.09.2018
• EAN: 9781119441953
• ISBN: 978-1-119-44195-3
• Pages: 176
• Thèmes: Wiley Finance; Wiley Finance Editions; Wiley Finance; Wiley Finance Editions
• Catégories: Sciences sociales, droit, économie > Economie > Economie privée; Finanzwesen, Finance & Investments, Finanz- u. Anlagewesen, Spezialthemen Finanz- u. Anlagewesen, Finance & Investments Special Topics