Role Of Global Macro Strategy On A Defined Benefit Pension Portfolio

Although this investment class can be considered the most conservative of the three, the low yield of government bonds in the past 10 years does not lend a comparative metric against many other investment opportunities (Jacobs, 2012). The fixed rate of these instruments allows for a guaranteed return, but should only be utilized at a point in an investing cycle when risk is higher than potential income growth. The 25% allocation that is invested in this class is positioned to provide a long term guaranteed investment, with the possible that these lower rates will not rise significantly in the next few years.

“The Benefits of diversification are clear. Portfolio theory has played a crucial role in explaining the relationship between risk and return where more than one investment is held. It also enables us to identify optimal and efficient portfolios.”

The change in the return on investment assumption is for all US plans. The economic consequence is that there will be less injection of cash by these pension owners during the lifetime of their pension. In 1984 the corporation established a new plan, which goal was an improvement in the minimum pension benefit. This constituted in a restructure of the Salaried Employees’ Retirement Plan.

How many will make poor choices on where to invest their money? Will financial advisors pressure people to make unwise decisions?” (Kraft & Furlong, 2015, p. 317). Finding out if this system would work is a huge gamble that puts the livelihood of retired individuals at stake. If privatization efforts turn out to be a disaster, either elderly individuals would have to take devastating cuts to the Social Security funds they were promised or the federal budget would have to take serious cuts in other areas to make up for the losses (Kraft and Furlong,

Pensions are financial arrangements that allow individuals to receive an income stream during their retirement years (Tatum, 2011). They are found in government institutions, private businesses, professional groups and various other settings. Pensions funds can be found as a part of an institutions or as an independent plan. Pension plans are a major participant in the capital markets. For example, consider the fact that Ontario Teachers’ Pension Plan has a net asset value of $96.4 billion at the end of December 31, 2009. Due to the large stake of pension plans in the local and global economy, there is a persistent pressure to improve pension accounting. These changes have gained momentum with the recent adoption of the International

The perception that there is a need for government involvement in pensions is in large part due to the fact that private pensions are decreasingly reliable. According to Bonnar (2008), “conventional wisdom suggests that private sector defined-benefit (DB) pension plans are in the midst of a funding crisis” (p. 21). In terms of how this applies to Ontario in particularly, it is probably based, Bonnar (2008) argues, on the fact that the largest 100 companies in the Toronto stock exchange saw their median funded ratios reduced from 108 percent by the end of the year 2000 down to 79 percent in 2005. This is despite the fact that contributions made by sponsors increased dramatically during the same period from 4 million dollars in 2000 to 14 million in 2005. This is based on a study looking at the largest 100 companies on the Toronto stock exchange index as determined by market capitalization (Bonnar, 2008, p. 21). Companies that did not offer defined benefit pension plans were excluded from the analysis. Companies in the financial sector were reviewed separately because of the financial ratios are so drastically different in that sector of the economy than elsewhere.

Global retirement income systems are stretched to the limit these days. People on the verge of retiring are worse off than those who retired a decade earlier due to the rising cost of purchasing an annual flow of future income in most jurisdictions around the world. According to Glenn Stevens, governor of Reserve Bank in Australia, the global retirement income system is under a lot of pressure, and the problem “must be acute” in Europe, where sovereign yields in some countries are negative for significant durations. Mr. Steven’s went on to say, "How will an adequate flow of income be generated for the retired community in the future, in a world in which long-term nominal returns on low-risk assets are so low?" According to Mr. Stevens, “they have to accept a lot more risk to generate the expected flow of future income they want," he warned.

In this paper I will discuss and summarize three articles, “Human Capital, Asset Allocation, and Life Insurance” by Peng Chen, Roger G. Ibbotson, Moshe A. Milevsky, and Kevin X. Zhu, “Asset Allocation in a Crisis” by Brian Jacobsen, and “The Pool and the Stream” written by Susan Trammell.

Founded in 1968, Zeus Asset Management Inc. (ZAM) is an independent, money – management company offering services to both institutional and individual clients. ZAM follows a conservative, risk-averse, quality-oriented investment management to exploit the extra return from long term strategies. In fact, the company’s investment philosophy of risk-aversion can be guaranteed by the experienced staff, who have the average of 18 years of experience in the sector and have deal with recession and major market downturns, compared to the age of 26 on average and 5 years of experience in Fidelity Investments’ staff – the largest asset-management

“According to a survey conducted by the Savings Education Council last year, 24% of all workers were not confident that they were prepared to retire comfortably.” Upon retirement we would like to maintain a certain level of income and lifestyle such as that established in the prime of our earning career. Through proper planning this goal can be achieved. I am going to establish the need for investments/ savings through the life-cycle model of consumption. I will then walk through standard retirement plans showing that additional funding will likely be needed for the upper-middle class, leading to stock and bond investments, risk tolerance of an individual investor, how that affects diversity

In this paper I will discuss and summarize three articles, “Human Capital, Asset Allocation, and Life Insurance” by Peng Chen, Roger G. Ibbotson, Moshe A. Milevsky, and Kevin X. Zhu, “Asset Allocation in a Crisis” by Brian Jacobsen, and “The Pool and the Stream” written by Susan Trammell.

Based on our data collected, we have compiled tables and graphs in order to visually represent our selected data and to test our hypothesis. Since our main objective of this research paper is to determine the effect of income levels on the investment choices between RRSP and TFSA, the sample from investors with both and neither plans were excluded when testing the hypothesis in order to isolate the variables that we wanted to test. Therefore only 79 participants would be considered when examining whether RRSP is better for high income investors. The investment options of these 79 participants were shown as Illustration 4.3.1 as below.

There is a severe variation of capital at risk of high frequency trading when compared to capita at risk for institutional investors as noted by KF&Y. Capital at risk is the total amount of capital that an organization deploys in all of its market positions at any specific point of time, as defined by IRRC institute. A high frequency trader generally keeps its capital at risk negligible. Although, HFT companies contributes for nearly 65% by volume in equities, their capital risk is small. On the other hand, the institutional investors or non- high frequency traders amount to a larger market ownership, more than 64% at the end of 2009. The hypothesis is that a small percentage of minority ownership

Pension funds can be distinguished by the way that the benefit is promised, and, consequently, by the way that funding

     As and investor, you are overwhelmed with advice in newspapers, magazines, and mailings discussing what to invest in for a successful retirement nest egg, when to start saving for retirement and who to invest with. There are millions of people who realize that an investment portfolio for retirement is necessary, but do they really understand the investment instruments and the amount they must invest for tomorrow? The subject of retirement is a fascinating area but it also could be a fuzzy subject without the correct amount of knowledge, understanding and professional guidance. The number one question of concern for individuals facing retirement issues is whether or not they