Challenges and opportunities for financial market globalisation
-
Upload
redington -
Category
Economy & Finance
-
view
209 -
download
0
Transcript of Challenges and opportunities for financial market globalisation
IFoA CANUK Joint Event 2016
金融市场全球化的机遇与挑战
1
IFoA CANUK Joint Event 2016
The globalization of financial market
2
Due to current control on capital account, China’s contribution to global financial integration is significantly lagged behind its contribution to world trade and GDP.
The gap is largely seen in portfolio investment and derivatives.
Source: IMF, Bank of England Quarterly Bulletin 2013 Q4
IFoA CANUK Joint Event 2016
The globalization of financial market
Japan as a case study
3
Source: IMF
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
Japanese External Assets as % of GDP
Assets, Direct investment Assets, Portfolio investment Assets, Other investment Assets, Reserve assets
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Japanese External Liabilities as % of GDP
Liabilities, Direct investment Liabilities, Portfolio investment Liabilities, Other investment
IFoA CANUK Joint Event 2016
The changes brought in by financial market globalization
4
Challenges Opportunities
Potential source of economic growth
Enhanced market depth and breadth
Increased sources of finance for domestic borrowers
Expanded opportunity set
More prone to external shocks
Lower profit margin from traditional sources
Higher liability costs for domestic FIs
Increased competition
Integration brings China closer to the world financial markets
IFoA CANUK Joint Event 2016
The static business model is not sustainable in the new business environment
5
Net Interest Income and Net Interest Margin - US Banking Sector
Source: Bloomberg
• Observable cycle in NIM
• Curve flattening pressed
down NIM
• Net interest income
growth slowed down
significantly in the last
decade
• Need to explore
alternative sources of
revenue to maintain
growth
IFoA CANUK Joint Event 2016
Facing the challenge
6
•Dynamically position market exposures based on views of the economic cycle
•Subject to capital charge and risk budgeting
•Expand opportunity sets into new territories
•Employ revolutionary investment philosophies
•Seek true alpha and smart beta – enhanced portfolio efficiency
•i.e. ABS, MBS and other Credit derivatives etc.
•Equity release mortgages
•Investment and advisory business
•Expand traditional business
•Increased leverage on traditional business
•Optimize capital structure to reduce financing costs and improve profit margin
Optimize Traditional Business
Innovative Products
Dynamic Market
Positioning
Alternative Investments
IFoA CANUK Joint Event 2016
The Evolution of UK Insurance Industry
7
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
UK Insurance Asset Balance Sheet
Fixed Income Equity Real Estate Other Investments
Source: Bloomberg on the four largest insurance groups in UK, AVIVA, Prudential, Legal & General and Standard Life
A typical case of change in insurance asset allocation in the UK market.
Moving away from the traditional bond and equity allocation towards more dynamic asset allocations
IFoA CANUK Joint Event 2016
Multi-Dimensional Challenge
Business Decisions
Finance
Risk Investment
Product
IFoA CANUK Joint Event 2016
• Enables timely and effective strategic decision-making by providing “calls” to actions when the client diverges from its goals.
• Provides a clear framework for assessing investment opportunities against the client’s specific requirements.
• Ultimately allows the Client to exercise better control over the investment strategy.
The Value of a Investment Risk Management Framework
9
Providing Transparency, Clarity and Structure to the Decision-Making Process
Objective Measurement Performance Indicators Performance (June 12) RAG
Primary Funding
Objective
To reach 110% funded on a swaps flat
basis by 2029
Expected Returns (ER) > Required
Returns (RR)
RR: Libor + 308bps
ER: Libor + 189bpsDifference: -120bps
Secondary
Funding Objective
To reach 100% funded on a
Gilts+100bps by 2022
Expected Returns (ER) > Minimum
Required Returns (MRR)
RR: Libor + 277bps
ER: Libor + 189bpsDifference: -88bps
Investment
Strategy
Actual Returns should exceed
Expected Returns
Actual Returns (AR) > Expected Returns
(ER)
AR: Libor + xxxbps
ER: Libor + 189bpsDifference: xxbps
n/a
Risk Budget
The investment strategy should not risk
the deficit worsening by £600mm over a 1 year period
VaR95 < £600mm VaR95: £656mm
Hedging Strategy
Nominal and inflation hedge ratio
should be maintained within +/- 5% of the funding ratio
Funding Ratio (swaps flat) 67% n/a
Nominal Hedge Ratio (swaps flat) 46.0%
Inflation Hedge Ratio (swaps flat) 94.6%
Collateral
Maintain sufficient eligible for the
purposes of covering margin calls that may arise from the Scheme’s current
derivative positions over a 1 year
period.
Total available eligible collateral £936mm
Remaining collateral after VaR95 event £610mm
RAG Status Metric is at or above target Metric is within [10%] of target Metric is more than [10%] away
“The Investment Risk Management Framework has put us in
control of the investment risk in our scheme.”
Penny Green – Chief Executive & Managing Director, SAUL Trustee
Company
IFoA CANUK Joint Event 2016
60%
65%
70%
75%
80%
85%
90%
95%
100%
105%
GHG Funding Level Comparison, 01/10/2010 - 31/12/2015
Original Strategy (Annual Vol. 15.82% since inception) (1 YRVol. 17.22%)
Dynamic De-Risking Strategy (Annual Vol. 12.31% sinceinception) (1 YR Vol. 7.86%)
Dynamic Asset Allocation
Case Study
De-risking
10
Dynamic Risk Management Strategy
driven by a FrameworkLimited Governance Resources Efficient Implementation
“Redington helped us to establish a robust pension risk management framework as well as devising and implementing a new investment strategy which enabled us to
be nimble and cost effective in making changes to our asset allocation to reduce risk as opportunities arose. The strategy has delivered outstanding results allowing
us to reduce the Scheme’s overall risk while taking us closer to our objective of full funding.”
Rita Powell – Independent Chairman of Trustees
Outperformed original strategy by
c.15% at significantly lower risk
Buy and Maintain
IFoA CANUK Joint Event 2016
DGF –动态成长基金
11
Sub CategoryPopular Example
Product
Asset Allocation
Approach
Long-Only or
Long/ShortEquity Weighting
Correlation to Equity
Markets
Expected Maximum
Drawdowns
1. Strategic
Allocation
Traditional
Balanced FundsRelatively Static Long-Only High (>50%) Very High Large
2. Dynamic
AllocationRuffer Total Return Highly Dynamic
Mostly Long-Only
(can hold some
relative value
strategies)
High Variability (10-
60%) Through the
Cycle
Varying Over Time Small-Medium
3. Absolute Return
Relative ValueStandard Life GARS
Risk-Based
Allocation, Not Asset
Allocation
Long/ShortN/A (risk-based
approach)Low Small
IFoA CANUK Joint Event 2016
DGF –动态成长基金
12
Sample Dynamic Allocation DGF Manager Asset Allocation since 2001
(2)
(3)
(4)
(1) Other
IFoA CANUK Joint Event 2016 13
Style Premia –风格溢价
Alpha
Style Premia
Market Risk Premia
Returns due to manager skill; a
feature of (successful!) active
management
Returns that provide
compensation for taking on
market exposure (e.g. risk
parity, synthetic equities)
Often disguised as “alpha”,
returns that are associated
with style factors
Value Momentum
Carry Defensive
Style Premia
IFoA CANUK Joint Event 2016
Style Premia –风格溢价
14
0
50
100
150
200
250
300
350
Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Regressed Invesco High Income Fund FTSE All Share
Market Value Momentum Defensive
Portfolio Weights 75% 13% 19% 52%
Source: Deutsche Bank, Invesco, Bloomberg; Calculations: Redington
Neil Woodford’s annualised
outperformance over the FTSE All
Share: 3.4% p.a.
Replicating
Portfolio
IFoA CANUK Joint Event 2016 15
Style Premia –风格溢价
Cumulative excess return of the style premia factors vs. MSCI World
-50%
0%
50%
100%
150%
200%
Dec-89 Dec-92 Dec-95 Dec-98 Dec-01 Dec-04 Dec-07 Dec-10 Dec-13
Cu
mu
lati
ve R
etu
rn
Value Momentum Carry Defensive MSCI World
IFoA CANUK Joint Event 2016
Multi-Class Credit –多种信用投资
16
Long Only Managers Long/Short Credit Hedge Funds
Benchmark Credit Absolute Return
Credit
Multi-Class Credit Credit Relative Value
Universe Long-only managers Long-only managersLong-only managers &
alternative managersAlternative managers
Credit
BetaLong only
Managed over the cycle
to avoid drawdownsLong-biased
Long and short over the
cycle
Return
TargetBenchmark + % Cash + 200-400bps Cash + 400-800bps Absolute return target
Interest
Rate Risk+/- Benchmark Typically neutral Typically long-biased
Varies widely on an
active basis
Credit
ProfileAs per benchmark
Mainly investment
gradeMainly high yield Varies
IFoA CANUK Joint Event 2016
Multi-Class Credit –多种信用投资
17
Wide Range of Assets
Dynamic Asset Allocation
Benchmark Agnostic Approach
Strategic Efficiency
Access to Specialist Manager Skills
IFoA CANUK Joint Event 2016 18
Multi-Class Credit –多种信用投资
2007 2008 2009 2010 2011 2012 2013 2014 2015
2.08%
US LEV
LOANS
-9.44%
EUR IG
70.44%
EUR HIGH
YIELD
10.33%
EUR HIGH
YIELD
1.51%
US LEV
LOANS
22.07%
EUR HIGH
YIELD
9.95%
EUR HIGH
YIELD
4.47%
EUR LEV
LOANS
5.50%
EUR LEV
LOANS
-0.57%
EUR LEV
LOANS
-21.20%
EM CORP
57.77%
US HIGH
YIELD
10.13%
US LEV
LOANS
0.72%
EUR LEV
LOANS
18.07%
EM SOV
9.19%
US HIGH
YIELD
2.12%
EUR IG
4.91%
EM CORP
-1.44%
EUR IG
-24.69%
US IG
51.62%
US LEV
LOANS
9.85%
EUR LEV
LOANS
-1.67%
EM CORP
14.54%
EM CORP
8.59%
EUR LEV
LOANS
1.83%
EUR HIGH
YIELD
3.17%
EM SOV
-3.29%
EM SOV
-29.10%
US LEV
LOANS
43.43%
EUR LEV
LOANS
9.32%
US HIGH
YIELD
-2.65%
US HIGH
YIELD
12.64%
US HIGH
YIELD
5.29%
US LEV
LOANS
1.60%
US LEV
LOANS
0.07%
EUR HIGH
YIELD
-4.07%
EM CORP
-30.01%
EUR LEV
LOANS
39.04%
EM SOV
7.93%
EM SOV
-2.66%
EUR IG
9.74%
EUR LEV
LOANS
3.58%
EM SOV
0.04%
US IG
-0.69%
US LEV
LOANS
-4.76%
US IG
-33.78%
EM SOV
25.17%
EM CORP
2.68%
EM CORP
-3.45%
US IG
9.67%
US LEV
LOANS
2.86%
US IG
-1.19%
US HIGH
YIELD
-1.07%
EUR IG
-5.23%
EUR HIGH
YIELD
-39.99%
US HIGH
YIELD
22.93%
US IG
2.31%
US IG
-7.25%
EM SOV
7.41%
US IG
2.14%
EM CORP
-1.35%
EM CORP
-3.18%
US IG
-6.97%
US HIGH
YIELD
-44.12%
EUR HIGH
YIELD
9.43%
EUR IG
0.46%
EUR IG
-8.27%
EUR HIGH
YIELD
5.34%
EUR IG
2.13%
EUR IG
-3.73%
EM SOV
-6.70%
US HIGH
YIELD
161%
45%
-49%
IFoA CANUK Joint Event 2016
2-6 Austin Friars, London EC2N 2HD Telephone : +44 (0) 20 7250 3331 www.redington.co.uk
For professional investors only. Not suitable for privatecustomers.
The information herein was obtained from various sources.We do not guarantee every aspect of its accuracy. Theinformation is for your private information and is fordiscussion purposes only. A variety of market factors andassumptions may affect this analysis, and this analysis doesnot reflect all possible loss scenarios. There is no certaintythat the parameters and assumptions used in this analysiscan be duplicated with actual trades. Any historical exchangerates, interest rates or other reference rates or prices whichappear above are not necessarily indicative of futureexchange rates, interest rates, or other reference rates or
prices. Neither the information, recommendations oropinions expressed herein constitutes an offer to buy or sellany securities, futures, options, or investment products onyour behalf. Unless otherwise stated, any pricing informationin this message is indicative only, is subject to change and isnot an offer to transact. Where relevant, the price quoted isexclusive of tax and delivery costs. Any reference to theterms of executed transactions should be treated aspreliminary and subject to further due diligence .
Please note, the accurate calculation of the liability profileused as the basis for implementing any capital marketstransactions is the sole responsibility of the Trustees'actuarial advisors. Redington Ltd will estimate the liabilities if
required but will not be held responsible for any loss ordamage howsoever sustained as a result of inaccuracies inthat estimation. Additionally, the client recognizes thatRedington Ltd does not owe any party a duty of care in thisrespect.
Redington Ltd are investment consultants regulated by theFinancial Conduct Authority. We do not advise on allimplications of the transactions described herein. Thisinformation is for discussion purposes and prior toundertaking any trade, you should also discuss with yourprofessional tax, accounting and / or other relevant advisershow such particular trade(s) affect you. All analysis (whetherin respect of tax, accounting, law or of any other nature),
should be treated as illustrative only and not relied upon asaccurate.
©Redington Limited 2014. All rights reserved. Noreproduction, copy, transmission or translation in whole orin part of this presentation may be made withoutpermission. Application for permission should be made toRedington Limited at the address below.
Redington Limited (6660006) is registered in England and Wales. Registered office: Austin Friars House 2-6 Austin Friars, London EC2N 2HD
联系方式
声明
近期获奖情况
Steven Yang Yu 于扬Co-Head of ALM & Investment Strategy
电话: +44 (0) 203 326 7118
Muqiu Liu 刘沐秋Senior Vice President
电话: +44 (0) 203 326 7109
19
Redington 微信公众号
IFoA CANUK Joint Event 2016 20