Introducing the EDHEC-Princeton Retirement Goal-Based Investing Index Series-an answer to the retirement problem
May 21, 2018-- With the growing need to supplement public and private retirement benefits with voluntary contributions, individuals are becoming increasingly responsible for their own retirement savings and investment decisions.
This global trend poses substantial challenges to individuals, who typically lack the expertise required to make such complex financial decisions. Unfortunately, current investment products such as target date funds that are often used as default options in retirement accounts, hardly provide a solution to investors' and households' replacement income needs in retirement.
In a new publication entitled "Applying Goal-Based Investing Principles to the Retirement Problem", EDHEC-Risk Institute and Professor John Mulvey of the Operations Research & Financial Engineering Department at Princeton University outline the shortcomings of existing retirement products, and lay the academic foundations for a new generation of risk-controlled target date funds.
view the Applying Goal-Based Investing Principles to the Retirement Problem research paper
Source: EDHEC-Risk Institute
Fifth annual FTSE Russell global institutional smart beta survey
May 21, 2018--Growing interest in multi-factor, ESG and education
In 2018, 91% of asset owners globally have a smart beta investment allocation, have evaluated or are planning to evaluate smart beta in the next 18 months
Survey shows a 16% increase in implementation or consideration over past five years, yet more than 50% of asset owners in the US & UK remain uncertain on the best approach
Use of multi-factor combination smart beta index-based investment strategies by global asset owners has more than doubled since first measured in 2015
Nearly 40% of global asset owners anticipate applying ESG to a smart beta strategy in the next 18 months-nearly half for performance reasons
Total assets under management of survey participants estimated at $3.5 trillion globally
FTSE Russell today published results from its fifth annual global institutional asset owner smart beta survey. The report provides insight into the major trends over recent years around awareness, popularity and use of smart beta index-based investment strategies by the global institutional investor community.
Source: FTSE Russell
IMF Working Papers-Sharp Instrument: A Stab at Identifying the Causes of Economic Growth
May 21, 2018--Summary:
We shed new light on the determinants of growth by tackling the blunt and weak instrument problems in the empirical growth literature. As an instrument for each endogenous variable, we propose average values of the same variable in neighboring countries.
This method has the advantage of producing variable-specific and time-varying-namely, "sharp"-and strong instruments. We find that export sophistication is the only robust determinant of growth among standard growth determinants such as human capital, trade, financial development, and institutions. Our results suggest that other growth determinants may be important to the extent they help improve export sophistication.
view the IMF Working Papers-Sharp Instrument: A Stab at Identifying the Causes of Economic Growth
Source: IMF
IMF Working Papers-Should We Fear the Robot Revolution? (The Correct Answer is Yes)
May 21, 2018--We analyze the implications for inequality and output, using a model with two assumptions: "robot" capital is distinct from traditional capital in its degree of substitutability with human labor; and only capitalists and skilled workers save.
We analyze a range of variants that reflect widely different views of how automation may transform the labor market. Our main results are surprisingly robust: automation is good for growth and bad for equality; in the benchmark model real wages fall in the short run and eventually rise, but "eventually" can easily take generations.
view the IMF Working Papers-Should We Fear the Robot Revolution? (The Correct Answer is Yes)
Source: IMF
London-Shanghai Stock Link Takes a Step Closer to Reality
May 20, 2018--Depositary receipts in each city will be cornerstone
System will start this year, according to exchange document.
The long-awaited link between stock exchanges in London and Shanghai is close to becoming a reality, according to a London Stock Exchange Group Plc presentation, another step in China's efforts to integrate with the international financial system.
Source: Bloomberg
DECPG Global Weekly
May 18, 2018--TAKING STOCK
U.S. industrial production and retail sales rose in April; new housing construction fell
Euro Area GDP growth slowed in 18Q1; inflation was confirmed at 1.2 percent in April.
Japan's GDP contracted for first time since 2015
China's industrial output growth picked up in April, but retail sales and investment growth slowed
Bond issuance in the SSA remained strong
U.S. industrial production and retail sales rose in April; new housing construction fell. U.S. industrial production rose 0.7 percent (m/m, sa) in April, following an upwardly revised gain of 0.7 percent in March (Figure 1). Mining output climbed 1.1 percent in April, owing to strong gains in oil and gas extraction. Utility output rose 1.9 percent, driven by a sharp rise in natural gas output.
Source: World Bank
Thomson Reuters-Fund Investors and APs Warm to Domestic Equity Funds and ETFs in April
May 16, 2018--While for the second consecutive month money market funds witnessed net outflows, handing back $1.2 billion for April, for the second month in a row both the stock & mixed-asset funds and fixed income funds macro-groups witnessed net inflows, taking in $7.9 billion and $6.0 billion, respectively.
Authorized participants (APs, those investors who actually create and redeem ETF shares) were net purchasers of stock & mixed-asset ETFs-injecting $12.2 billion. And for the seventeenth consecutive month they were net purchasers of bond ETFs-injecting $15.9 billion for April.
Source: Thomson Reuters
Exchanges maturing in ESG leadership as nine-in-ten embrace sustainability-new WFE survey out today
May 15, 2018--The World Federation of Exchanges ("The WFE"), the global industry group for exchanges and CCPs, today published its fourth annual Environmental, Social and Governance (ESG) survey of members, which shows nearly 90% of member exchanges are embracing sustainability initiatives.
The WFE survey captured the nature and engagement with ESG issues by member exchanges in both developed and emerging markets.
Overall, member exchanges continue to leverage their position to adopt more sustainability initiatives in their respective markets. Exchanges are prioritising the long-term sustainability of the financial system to educate more market participants, proactively drive ESG disclosures, and increase the number of sustainability products offered in their markets. Some exchanges said a lack of resources has hindered the adoption of ESG initiatives, as has insufficient demand, and there are reservations about the potential impact of these initiatives.
Source: World Federation of Exchanges (WFE)
Morningstar Passive Sustainable Funds: The Global Landscape
May 15, 2018--In this report, we provide an overview of the global landscape of index-tracking sustainable funds, ,looking at trends in asset growth, asset flows, and product development.
We focus on the two regions where these funds have seen the greatest adoption, Europe and the United States. We also examine the broad range of approaches that aim to address various sustainability and investment objectives. We finish by providing a list of key criteria investors should consider when choosing among these funds.
Source: Morningstar
IMF Working Papers-Evolution of the Global Financial Network and Contagion: A New Approach
May 15, 2018--Summary:
This paper studies the interconnectedness of the global financial system and its susceptibility to shocks. A novel multilayer network framework is applied to link debt and equity exposures across countries.
Use of this approach-that examines simultaneously multiple channels of transmission and their important higher order effects-shows that ignoring the heterogeneity of financial exposures, and simply aggregating all claims, as often done in other studies, can underestimate the extent and effects of financial contagion. The structure of the global financial network has changed since the global financial crisis, impacted by European bank’s deleveraging and higher corporate debt issuance. Still, we find that the structure of the system and contagion remain similar in that network is highly susceptible to shocks from central countries and those with large financial systems (e.g., the USA and the UK). While, individual European countries (excluding the UK) have relatively low impact on shock propagation, the network is highly susceptible to the shocks from the entire euro area. Another important development is the rising role of the Asian countries and the noticeable increase in network susceptibility to shocks from China and Hong Kong SAR economies.
view the IMF Working Papers-Evolution of the Global Financial Network and Contagion: A New Approach
Source: IMF