Standard Life Investments

Investment Insight

Thought-provoking analysis of key investment issues

Our series of Investment Insight papers deliver thought-provoking analysis of key investment themes. Through focused and unique insights into topical issues, we seek to provide investors with a deeper understanding of the current challenges and opportunities within global investment markets.

Solvency II & Absolute Return Investing

Solvency II & Absolute Return Investing

Craig Turnbull - Investment Director, Insurance Solutions

In this paper, we examine the important implications of Solvency II, the latest European Union Directive designed to harmonise insurance regulation across member states. In particular, we highlight how the risk-based nature of the Directive, together with its 'look-through' requirement, confirms the underlying risk efficiency of well-diversified absolute strategies. We also show how these strategies can be used to improve capital-efficient returns.

Read more

Forward-Looking Scenario Analysis - Preparing your portfolio for the unknown unknowns

Forward-Looking Scenario Analysis - Preparing your portfolio for the unknown unknowns

Historical stress testing is an established approach to tail-risk management. However, there is less consensus on how best to undertake forward-looking scenario analysis. This paper examines how investors can incorporate expert opinions into projections of portfolio outcomes. We also illustrate that using a diversified multi-asset approach can help mitigate losses in extreme market scenarios.

Read more

Bridging the Return Gap in Asset Allocation

Bridging the Return Gap in Asset Allocation

Government bond yields are close to multi-decade lows. Respondents to the Asia Pacific Insurance Survey, representing an estimated 60% of the total Asia Pacific insurance market, hold more than half their assets in fixed income securities. These low yields mean insurance companies are struggling to generate sufficient returns on their investments to generate a profit on their guaranteed-return products. At the same time, regulatory changes are forcing insurance companies to recognise the risks created by this gap in returns. This is forcing insurers to rethink their asset allocation strategies.

Read more

Evaluating Multi-Asset Strategies

Evaluating Multi-Asset Strategies

To fairly evaluate the performance of a multi-asset portfolio requires looking beyond simple correlation measures. In this paper published in The Journal of Portfolio Management, we discuss the limitations of correlations and propose a range of techniques to help us appraise the effectiveness of a multi-asset strategy.

Executive Summary

Read more

Doing 'the right thing' and making money

Doing 'the right thing' and making money

ESG analysis is a fundamental tool for corporate bond investors. We define what it means to do ‘the right thing’, look at how portfolio managers can incorporate ESG analysis in their investment process, and consider how investors can do ‘the right thing’ and make money.

Watch Video

Read more

2018 Investment Themes

2018 Investment Themes

Eight of our investment experts provide themes for the year ahead, on topics ranging from the rapid advances in technology to the implications of political risk.

Read more

How insurers are navigating persistent market volatility and Solvency II

How insurers are navigating persistent market volatility and Solvency II

Bruce Porteous - Investment Director, Insurance Solutions

The arrival of the Solvency II regulatory regime in Europe on 1 January 2016 triggered a paradigm shift in asset allocations among Europe’s insurance firms. This trend is gaining traction as the industry grapples with an uncertain market, while navigating changing financial regulations in the UK and Continental Europe.

Read more

Populism and the Threat to Globalisation

Populism and the Threat to Globalisation

Jeremy Lawson - Chief Economist

We live in an era of globalisation. And an era of increased income inequality. Are the two linked? And are they the driver behind the rise of populist parties in Europe, the election of President Trump, Brexit? In this paper we explore these issues alongside the social and cultural changes that have happened in tandem. We consider the implications for the future of globalisation and for markets.

Interactive slide show

Video

Read more

The Investment Challenges of Decumulation, Part 2

The Investment Challenges of Decumulation, Part 2

Following on from our paper ‘The Investment Challenges of a Decumulation World’, this second paper explores further the investment aspects of the decumulation challenge. In particular, it seeks to illustrate:

  • the substantial added value of a multi-asset growth approach to savings in retirement compared with passive equity, even after fees and
  • whether there is a single ‘drawdown’ level that is appropriate for all.

Read more

The Investment Challenges of a Decumulation World

The Investment Challenges of a Decumulation World

The 2014 UK pension reforms presented UK pension savers with significantly greater freedom than previously. The reforms have major implications for DC scheme investment strategies — in particular for the lifestyle strategies adopted, and for individuals’ investment choices regarding the post retirement period. In this paper, we examine some of these challenges. To do this, we model different investment strategies using historical financial and economic data, to determine the impact on member outcomes and the certainty of achieving these.

Read more

The impact of slowing working-age population growth

The impact of slowing working-age population growth

The developed world is at a turning point – growth in the working-age population has peaked, economies are slowing, and voters are displaying scepticism for immigration. This raises questions over how economies can grow without more people of working age to wield a shovel or tap a keyboard. In turn, this has implications for real estate and the number of new buildings needed in the future. In this paper, we focus on the economic and commercial real estate impacts of slowing growth in the working-age population.

Read more

Embracing Alpha in a Low Return World

Embracing Alpha in a Low Return World

Jonathan Price - Global Head of Product & Investment Specialist

With future investment returns likely to be lower than previously enjoyed, what can investors do to increase returns. This paper suggests if market beta contributes less to overall returns than before, alpha will become an ever more important return component. We discuss how alpha can be captured across equities, bonds and private markets.

Read more

The Benefits of Growth with Lower Volatility

The Benefits of Growth with Lower Volatility

David Bint - Investment Director

Malcolm Jones - Investment Director, Absolute return and multi-asset investing

In this paper, we look at some ways of managing volatility and demonstrate how the inclusion of a low-volatility growth strategy can provide a superior overall solution. We go on to introduce an ‘enhanced-diversification’ approach, a concept we developed to achieve reduced volatility without compromising growth potential.

Read more

Active Investing - Defining the benefits, challenging the myths

Active Investing - Defining the benefits, challenging the myths

The active versus passive debate is not new, but a number of issues have recently given it renewed vigour. This paper examines the enduring benefits of active investing and discusses why we believe many of the arguments used against active approaches rely on highly selective criteria or disregard conflicting evidence.

Read more

Leisure in the UK Retail Environment

Leisure in the UK Retail Environment

As the digital era has made shopping more convenient for consumers, the need for retailers to deliver a unique physical shopping experience is increasingly important. Leisure (including food & beverage, cinemas and entertainment) has a significant role to play in this ever-demanding retail landscape. In the latest paper from our real estate research team, we examine leisure’s growth as part of a retail offering and seek to establish whether there is a clear link with rental growth. In doing so, we investigate leisure’s influence on both shopping centre assets and major UK town centres.

Read more

UK Pension Reform - One Year On

UK Pension Reform - One Year On

Malcolm Jones - Investment Director, Absolute return and multi-asset investing

The 2014 UK pension reforms have implications for pension savers and providers. In this article, we assess some of the developments that have occurred throughout the year and compare DC savers’ actions with those expected when the changes were announced. We also look at what DC plan providers might do to ensure individual member needs can be accommodated.

Read more

Shopping for opportunities in UK retail

Shopping for opportunities in UK retail

The UK retail sector remains under pressure following years of neglect and mismanagement, poor economic conditions and the rise of online retailing. However, the short-term prognosis for the retail sector currently looks better than it has done for some time. The UK is enjoying a reasonably robust economic backdrop, consumer confidence is buoyant and disposable incomes are improving. Against this backdrop, selecting the right assets in the best areas is vital. In this paper, we examine the current state of the UK retail sector and provide proprietary analysis on where we see the best opportunities and those areas to avoid.

Read more

The Rise of the Millennials

The Rise of the Millennials

Amanda Young - ESG Investment Team

The financial industry and the products it supplies have always evolved to meet market challenges and opportunities. Today is no different. One of the key factors that will drive the industry over the coming years is the rise in prominence of the so-called Millennials (also known as Generation Y). This is the generation born between the early 1980s and 2000. The expectations and values of this tech-savvy group differ from those that have gone before them, most notably when it comes to social, economic and environmental issues.

Read more

The Investment Challenges of Decumulation, Part 3

The Investment Challenges of Decumulation, Part 3

Malcolm Jones - Investment Director, Absolute return and multi-asset investing

In this paper, we investigate the wealth accumulation stage of the DC pension journey, now that pension savers have greater freedom in accessing their fund post-retirement. In particular, we show that the accumulation and decumulation stages need to be considered as two interlinked parts of the same process.

Read more

Smaller Companies - The long-term opportunity

Smaller Companies - The long-term opportunity

Harry Nimmo - Investment Director

Longer term, smaller companies have outperformed large-caps and have also done so on a risk-adjusted basis - a phenomenon known as the 'smaller company paradox'. Theoretically, such abnormal returns are usually short term and arbitraged away. However, in this paper, we examine the various structural factors behind the paradox which actually suggest this phenomenon could persist over the long term.

Read more

Activist Investing – How should boards deal with the activist investor?

Activist Investing – How should boards deal with the activist investor?

Jonathan Cobb - Governance & Stewardship Director

Activist investing is growing rapidly but remains small in the context of global investment funds. And yet, judging by widespread media coverage, it appears to enjoy a level of influence out of proportion to the resources it controls directly. In this paper, we assess some important considerations for the boards of UK businesses when dealing with activist investors.

Read more

Optimal Matching Adjustment

Optimal Matching Adjustment

Bruce Porteous - Investment Director, Insurance Solutions

Solvency II is an extremely important EU directive with significant implications for UK and European insurers. One of the issues which need to be considered is how to optimise the Matching Adjustment. In this paper, we discuss the gains available to insurers prepared to consider actively constructing optimal MA asset portfolios.

Read more