We propose a ‘buy, hold, sell’ (BHS) deterministic lifecycle strategy that involves buying and holding assets until they are sold to generate income. Savings are invested entirely into a risky portfolio until a pre-specified ‘switch age’ and then entirely into a risk-free portfolio after...

As the Australian superannuation industry consolidates, we ask whether large size – say $50-$100 billion in assets and beyond – is likely to benefit fund members. Our answer is a ‘definite maybe’. Large size has its advantages, but also gives rise to disadvantages and significant...

This article sets out principles and decision rules for setting appropriate drawdown and investment strategies during retirement given an individual’s objectives and risk tolerance. In particular, we highlight how the suitable drawdown strategy can relate to the objective, and how annuities...

We propose a cohort model that evaluates hedge funds against peer groups executing similar investment strategies formed using return correlations. Our method improves identification of skilled managers, as evidenced by a strong ability to explain hedge fund returns out-of-sample together with...

We relate capacity constraints for hedge funds to the size of their cohort, measured by the total assets of funds applying a similar strategy identified using return correlations. Fund performance is shown to have a significant negative relation with cohort size, bit no clear relation with...

We deploy a stochastic life-cycle model to examine how differing levels of the superannuation guarantee (SG) impact on the welfare of individual Australians under existing superannuation, tax and pension eligibility rules. Our main focus is the effect of various assumptions on the optimal SG,...

An approach for designing a menu of comprehensive income products for retirement (CIPRs) is proposed and demonstrated. The approach entails for steps: defining and characterising member types based on selected attributes; specifying a utility function to capture the objectives and preferences of...

The literature on whether active management adds value is examined through the prism of the proposition by Sharpe (1991) that active investing is a negative sum game after costs. Focal points include how active fund research does not directly test Sharpe's proposition and seems inconsistent with...

This paper investigates how the nature of risk changes as investment horizon lengthens, and what it means for investors. Accumulated wealth is analyzed in terms of four drivers: expected return, cash flow innovations, discount rate innovations, and reinvestment rates. This perspective highlights...

We use a stochastic life-cycle model to examine the implications for Australian retirees of full access to dividend imputation credits. We find that the availability of imputation credits can justify a significant bias towards Australian equities in retirement portfolios, largely at the expense...