Category Archives: Uncategorized

Don’t Confuse Income With Yield

Yield conventions differ for stocks and bonds, but the various calculation methods for both asset classes have an important characteristic in common—they are alternative expressions of price.  Measures of yield specifically relate current price to how much dividend or interest income holders of a particular security are likely to get.  Thinking of yield as income Read more […]

Potential Risks When Constructing a Sustainable Lifetime Income

In retirement, financial ruin is taken to mean when one’s savings have been depleted before one passes away.  If one’s savings are invested in a diversified portfolio, financial ruin is taken to mean the combined effects of withdrawals and adverse market conditions that can potentially deplete the portfolio before one’s passing. Financial ruin to one’s Read more […]

Retail Fee Premium and its Impact on Fund’s Performance: Observations From SPIVA® Institutional Year-End 2016 Scorecard

The impact of fees on managers’ performance continues to make headlines.  With the most recent round of actively managed fee reductions[1] taking place in February 2017, market participants can benefit from lower fees as managers compete for capital.  In the recently issued “SPIVA Institutional Scorecard – How Much Do Fees Affect the Active Versus Passive Read more […]

Financials Gain More Prominence in Latest Low Vol Rebalance

Volatility has been generally subdued so far this year.  In the latest rebalance, the S&P 500® Low Volatility Index’s most significant sector shift was to Financials (adding 5% to bring the sector to 21% of the index).  Allocation in the remaining sectors did not deviate too far from the last rebalance. Technology’s weight, which increased Read more […]

How to Address Retirement Income in Investment Policy Statements

Recently, the US Department of Labor (DOL) turned its attention to the adequacy of a retirement plan participant’s account balance, stimulating two debates about how to improve participant outcomes.[1] The first debate concerns how to help participants measure their “retirement readiness” in terms of income replacement at retirement. The second centers on whether there are Read more […]

Green Bonds: Addressing Solvency II Benchmarking Requirements

Solvency II is the new region-wide supervisory framework for insurance and reinsurance companies operating in the European Union.  The new regime includes three pillars, calculation of capital reserves, management of risk and governance, and reporting to the national supervisory authority.  Moving to a risk-based approach in calculating solvency capital requirements (SCR) will require reassessment of Read more […]

History of the 401(k)

Thirty-nine years ago, the Revenue Act of 1978 was signed, adding section 401(k) to the Internal Revenue Code and creating the first US defined contribution plans. While the code itself simply described a provision under which employees would not be taxed on the portion of income they chose to receive as deferred compensation, it ushered Read more […]

The Wind Bloweth Where It Listeth…

In the latest quarterly rebalance (effective at market close on May 19, 2017), the S&P 500 Low Volatility Index added more weight from the technology sector. The jump from 7% to 12% is the largest increase for any sector. Meanwhile, the index continued to shed weight in Consumer Staples and Utilities, historically the stalwarts of Read more […]

100 Days Later in Mexico

100 days…is it a milestone?  Is it a key number?  I’m not sure, but everybody looks like they love to write about it, so I will too.  What I know is in Mexico we have a saying that goes, “If the U.S. sneezes, Mexico gets a cold.”  Following Dennis Badlyans’s post “Does the Outperformance of Read more […]

15 Years of SPIVA – Where Does the Active Versus Passive Debate Go From Here?

In the inaugural publication of the Journal of Portfolio Management in 1974, Nobel Laureate Paul Samuelson wrote that there is no “brute fact” that “there could exist a subset of decision makers in the market capable of doing better than the averages on a repeatable, sustainable basis.”[1]  That article partly inspired John Bogle to launch Read more […]