Asset Allocation und Shortfall Risk nach der Pensionierung : Eine Untersuchung von Risiko- und Rendite-Eigenschaften mittels Monte Carlo Simulationen

Before retirement, the composition of the portfolio is usually changed to include relatively secure assets. Products such as life cycle and target date funds have been set up with this in mind. This paper addresses the question of whether it is sensible for wealthy private clients to change to a risk-free investment strategy as soon as they reach (early) retirement and how generational, individual expectations and the economic climate impact the decision to change strategy in one direction or the other. In the first part of the paper, the income and assets of the generations in the life cycle are examined; this involves assessing empirical findings, life cycle models, changing consumer expenditure as clients grow older and the effects of an ageing society in industrialised nations on the financial markets. The practical component of the paper focuses on using Monte Carlo simulations to calculate how to manage six portfolios, which have different asset allocations depending on the risk/return profile, in the post-retirement phase. This takes into account withdrawals, inflation, costs, taxation and currency hedging. Annualised return is used to measure the performance of individual investment strategies and the Sharpe Ratio is used to measure risk-adjusted return. Volatility, shortfall risk and historical stress tests are taken as the measures of risk.Die Portfoliozusammensetzung wird normalerweise auf den Pensionierungszeitpunkt hin zu relativ sicheren Assets verschoben. Nach diesem Mechanismus werden auch Produkte wie Life-Cycle- oder Target-Date-Fonds gestaltet. In dieser Arbeit wird der Frage nachgegangen, ob die Umschichtung in eine risikolose Anlagestrategie für vermögende Privatkunden bereits ab Erreichen der (Früh-)Pensionierung sinnvoll ist und wie generationsbedingte, individuelle Erwartungen sowie die Entwicklung der wirtschaftlichen Rahmenbedingungen eine Umschichtung in die eine oder andere Richtung bewirken. Untersucht werden zuerst Einkommen und Vermögen der Generationen im Lebenszyklus: Empirische Befunde, Life-Cycle-Modelle, veränderte Konsumausgaben durch Alterung und Auswirkungen der alternden Gesellschaft in Industrieländern auf die Finanzmärkte. Im praktischen Teil der Arbeit wird mittels Monte Carlo Simulationen berechnet, wie sich sechs Portfolios mit unterschiedlicher Asset Allocation hinsichtlich Rendite und Risiko über die Nachpensionierungsphase entwickeln. Dabei werden Einflussfaktoren wie Entnahmen, Inflation, Kosten, Steuern sowie Währungsabsicherung berücksichtigt. Als Renditemasse für die einzelnen Anlagestrategien werden die annualisierten Renditen und als risikoadjustierte Kennzahl die Sharpe Ratios ausgewiesen. Als Risikomasse fliessen Volatilität, Shortfall Risk und historische Stress Tests ein.Before retirement, the composition of the portfolio is usually changed to include relatively secure assets. Products such as life cycle and target date funds have been set up with this in mind. This paper addresses the question of whether it is sensible for wealthy private clients to change to a risk-free investment strategy as soon as they reach (early) retirement and how generational, individual expectations and the economic climate impact the decision to change strategy in one direction or the other. In the first part of the paper, the income and assets of the generations in the life cycle are examined; this involves assessing empirical findings, life cycle models, changing consumer expenditure as clients grow older and the effects of an ageing society in industrialised nations on the financial markets. The practical component of the paper focuses on using Monte Carlo simulations to calculate how to manage six portfolios, which have different asset allocations depending on the risk/return profile, in the post-retirement phase. This takes into account withdrawals, inflation, costs, taxation and currency hedging. Annualised return is used to measure the performance of individual investment strategies and the Sharpe Ratio is used to measure risk-adjusted return. Volatility, shortfall risk and historical stress tests are taken as the measures of risk

Ruhig Schlafen mit inflationsindexierten Anleihen

For many years, bonds, in particular government bonds, were thought to be a safe investment. Then came the high inflation rates of the eighties which considerably reduced real earnings. A new instrument was needed to compensate for the effects of inflation. As a result, inflation-indexed bonds (IIBs) were created. Only few people know anything much about IIBs, which is a problem. This paper aims to introduce a wider audience to the benefits of IIBs. It will cover the basic elements, the benefits and drawbacks and the different markets of this new class of assets and also talk about the mathe-matical concepts necessary to understand this financial issue. Furthermore, the behavior patterns of IIBs in different economic phases and the two most significant variables in this context – real rates and inflation – will be examined in detail. While IIBs gain in value during periods of stagflation, they are under a great deal of pressure whenever an economic boom coincides with the absence of inflationary tendencies. However, this paper intends to go beyond mere theory: Findings drawn from macroeconomic research will be used to formulate investment strategies. Different methods need to be chosen to correspond to the investment horizon. Investors who focus on the short term tend to opt for carry trades, while long-term oriented investors prefer break-even trades. Based on their specific characteristics, IIBs should have less correlation to other types of asset allocation such as stocks or nominal bonds and thus be able to improve the risk/profit profile of any portfolio. The empirical study that forms part of this thesis is based on quantitative methods and proves that in the real world this hypothesis is, for the most part, true. Indeed, IIBs have a risk-reducing effect on a portfolio while profit expectations remain unchanged. Combined with conventional bonds, IIBs can provide useful information to financial policy makers and economists with regard to real interest rates and inflation expectations and in doing so exceed present measures in precision. Compared to the market, investment funds that invest in IIBs are exposed to consistently lower risks. They are also able to reflect the market quite accurately. However, they are unable to match it in terms of profit – in particular concerning the charges. Thus, they are suitable instruments for investors who want to be represented in the IIB market but do not expect any additional profit.Jahrelang waren Anleihen, insbesondere Staatsanleihen, als sichere Investition betrachtet worden. Durch die hohen Inflationsraten in den 80er Jahren wurde jedoch der Realertrag der Anleihen beträchtlich vermindert. Es wurde nach einem Instrument gesucht, welches die inflationären Effekte kompensieren kann. So entstanden inflationsindexierte Anleihen (IIA). Das Problem besteht nun aber darin, dass nur die Wenigsten über IIA Bescheid wissen. Folglich geht es in dieser Arbeit darum, IIA einem breiten Publikum näher zu bringen. Neben den fundamentalen Bausteinen, den Vor- und Nachteilen sowie den verschiedenen Märkten dieser neuen Vermögensklasse werden die fürs Verständnis notwendigen finanzmathematischen Konzepte vorgestellt. Des Weiteren werden das Verhalten von IIA in unterschiedlichen konjunkturellen Phasen erläutert und die zwei in diesem Zusammenhang bedeutendsten Variabeln – Realzins und Inflation – näher unter die Lupe genommen. Während IIA insbesondere in einer Stagflation an Wert gewinnen, geraten sie in Boomphasen bei gleichzeitiger Inexistenz inflationärer Tendenzen besonders stark unter Druck. Damit es nicht bei reiner Theorie bleibt, werden die aus der makroökonomischen Betrachtung gewonnenen Erkenntnisse zur Formulierung von Investitionsstrategien genutzt. Dem Anlagehorizont entsprechend sind unterschiedliche Vorgehensweisen zu wählen. Kurzfristig orientierte Investoren konzentrieren sich auf Carry Trades, eher längerfristig denkende auf Breakeven Trades. Aufgrund ihrer spezifischen Eigenschaften sollten IIA geringe Korrelationen zu anderen Vermögensklassen wie Aktien oder Nominalanleihen aufweisen und damit das Risiko/Ertragsprofil eines jeden Portfolios optimieren können. Die in dieser Arbeit enthaltene empirische Studie, welche auf quantitativen Methoden aufbaut, zeigt, dass sich diese Vermutung in der Realität mehrheitlich bewahrheitet. Tatsächlich wirken IIA im Portfoliozusammenhang risikoreduzierend bei unveränderten Ertragsaussichten. Kombiniert mit konventionellen Anleihen liefern IIA Geldpolitikern sowie Ökonomen nützliche Informationen über die realen Zinssätze und die Inflationserwartungen und übertreffen dabei in ihrer Genauigkeit aktuelle Messgrössen. Anlagefonds, die in IIA investieren, gehen im Vergleich zum Markt durchwegs geringere Risiken ein, bilden ihn in der Regel auch sehr gut ab, können jedoch renditemässig – insbesondere nach Gebühren – nicht mithalten. Sie eignen sich also für Investoren, die zwar im IIA-Markt vertreten sein wollen, aber gleichzeitig keinen Mehrertrag erwarten.For many years, bonds, in particular government bonds, were thought to be a safe investment. Then came the high inflation rates of the eighties which considerably reduced real earnings. A new instrument was needed to compensate for the effects of inflation. As a result, inflation-indexed bonds (IIBs) were created. Only few people know anything much about IIBs, which is a problem. This paper aims to introduce a wider audience to the benefits of IIBs. It will cover the basic elements, the benefits and drawbacks and the different markets of this new class of assets and also talk about the mathe-matical concepts necessary to understand this financial issue. Furthermore, the behavior patterns of IIBs in different economic phases and the two most significant variables in this context – real rates and inflation – will be examined in detail. While IIBs gain in value during periods of stagflation, they are under a great deal of pressure whenever an economic boom coincides with the absence of inflationary tendencies. However, this paper intends to go beyond mere theory: Findings drawn from macroeconomic research will be used to formulate investment strategies. Different methods need to be chosen to correspond to the investment horizon. Investors who focus on the short term tend to opt for carry trades, while long-term oriented investors prefer break-even trades. Based on their specific characteristics, IIBs should have less correlation to other types of asset allocation such as stocks or nominal bonds and thus be able to improve the risk/profit profile of any portfolio. The empirical study that forms part of this thesis is based on quantitative methods and proves that in the real world this hypothesis is, for the most part, true. Indeed, IIBs have a risk-reducing effect on a portfolio while profit expectations remain unchanged. Combined with conventional bonds, IIBs can provide useful information to financial policy makers and economists with regard to real interest rates and inflation expectations and in doing so exceed present measures in precision. Compared to the market, investment funds that invest in IIBs are exposed to consistently lower risks. They are also able to reflect the market quite accurately. However, they are unable to match it in terms of profit – in particular concerning the charges. Thus, they are suitable instruments for investors who want to be represented in the IIB market but do not expect any additional profit

Financial Literacy in der Schweiz : Erhebung über den Stand des Finanzwissens

In 2005, the Organization for Economic Cooperation and Development OECD published a study on financial education at an international level, entitled "Improving Financial Literacy: Analysis of Issues and Policies". It revealed that a large proportion of the population has very limited knowledge of financial issues and that the general level of knowledge is grossly overestimated. In addition, it became clear that people find it difficult to find and to grasp pertinent financial information. Similar results supporting these findings were yielded by two other studies conducted in Germany. Switzerland was excluded from these studies, which is why Investor’s Dialogue, a financial consulting firm, commissioned a new study, conducted as a semester assignment at the Zurich University of Applied Sciences ZHAW, to establish whether, and to what extent, such problems exist in Switzerland. Financial education is gaining in importance. Increasingly, different areas of the world of finance require us to place more emphasis on taking care of our own financial affairs. This is a topic of some significance, in particular in the context of developments in the field of retirement planning. This shift towards assuming more personal responsibility in money matters can however only be successful where there is enough fundamental knowledge in financial matters. A survey entitled "Financial Literacy in Switzerland” was carried out using a questionnaire which was sent to private citizens, ZHAW students and ZHAW staff, as well as to two Swiss companies. The questionnaires which were returned and analyzed yielded the following results: The surveyed individuals consider themselves to be quite knowledgeable in financial matters. In answer to one question, the subjects replied that it was no problem for them to explain different financial products. However, when the participants’ self-assessment was put to the test, it became evident that, for the most part, their actual level of knowledge was considerably lower than they had assumed. In fact, the less actual financial knowledge they had, the larger the gap between self-estimation and real knowledge. A major problem consists of knowing how to assess financial risks and rates of return. Many people do not seem to be able to understand the relationship between these two factors. Another area where there is a great need for more knowledge is retirement planning. Only about half of the respondents were able to answer the relevant questions correctly. When asked to identify reliable sources of relevant information, they listed newspapers and magazines, family members and friends, as well investment consultants. Accordingly, people mostly seek advice from investment consultants or consult written information, which according to the OECD study does not have any significant effect on financial behavior. Lectures and other public events were rated to be rather mediocre in terms of usefulness. Surprisingly, more than 50% of all respondents claimed to be interested in learning more about handling their finances. We therefore suspect that there is considerable potential for financial education. Based on these insights, we are convinced that there is a demand in Switzerland for products to develop financial knowledge. We thus propose a new educational scheme: Learning about the complexities of finance would be part of compulsory school education. This would enable students to acquire the basics of personal finance and money management at an early age and enable them to continuously enhance their knowledge as they get older. Anyone who lacks the necessary basic know-how after completing their education should attend additional public functions in order to acquire that knowledge. To this end, it might be advisable to cooperate with banks and insurance companies, which could offer financial seminars and educational activities for their clients. After all, well-informed clients with a broader knowledge of financial matters are likely to be more profitable, as well. People who already have a basic understanding of all things financial are recommended to take part in a program to enhance their financial knowledge. This will be aimed at closing critical knowledge gaps. The type of program most suited to this goal would be a modular system which would offer specific courses according to the individual situation and the specific needs of every investor. A combination of personal investment advice, public seminars and self study might be advisable here. Such courses might once again be offered in cooperation with financial institutions and/or with public or private schools.Im Jahr 2005 hat die Organisation für wirtschaftliche Kooperation und Entwicklung (OECD) eine internationale Studie zum Thema "Analphabetismus im Finanzbereich" durchgeführt. Dabei wurde festgestellt, dass der Wissensstand bezüglich finanziellen Belangen bei einem Grossteil der Bevölkerung sehr gering ist und zudem stark überschätzt wird. Zudem wurde deutlich, dass die Menschen Schwierigkeiten haben, Informationen im Finanzbereich zu finden und zu verstehen. Zwei weitere Studien aus Deutschland unterstützen diese Resultate mit ähnlichen Ergebnissen. Da die Schweiz an dieser Studie nicht teilgenommen hat, wurde in der nachfolgenden Studie, im Auftrag des Finanzberatungsunternehmen "Investor’s Dialogue", im Rahmen einer Semesterarbeit an der Zürcher Hochschule Winterthur untersucht, ob und in welchem Ausmass diese Probleme auch in der Schweiz bestehen. Die Bildung im Finanzbereich gewinnt laufend an Bedeutung. Zunehmend wird in verschiedenen Bereichen der Finanzwelt wieder mehr Wert auf Eigenverantwortung gelegt. Dies ist vor allem im Zusammenhang mit den Entwicklungen in der Vorsorge ein wichtiges Thema. Diese Eigenverantwortung kann aber nur dann erfolgreich übernommen werden, wenn ein Grundwissen im Finanzbereich vorhanden ist. Die Erhebung zum Thema "Financial Literacy in der Schweiz" erfolgte mittels eines Fragebogens, welcher an Privatpersonen, Studenten und Mitarbeiter der Zürcher Hochschule Winterthur, sowie an zwei schweizerische Unternehmen versendet wurde. Aus den zurückerhaltenen Fragebogen konnten folgende Erkenntnisse gewonnen werden: Die befragten Personen schätzen ihre Kenntnisse im Finanzbereich als gut bis sehr gut ein. Bei einer Frage wird angegeben, dass das Erklären verschiedener Finanzprodukten in der Mehrheit der Fälle kein Problem darstelle. Bei der Überprüfung dieser Selbsteinschätzung wird aber deutlich, dass das tatsächliche Wissen bei fast allen Teilnehmern deutlich tiefer ist als von diesen angenommen. Dabei fällt auf, dass die eigene Überschätzung mit sinkendem Wissensstand stark zunimmt. Die grössten Wissenslücken bestehen beim Einschätzen von Risiken und Renditen. Der Zusammenhang zwischen diesen beiden Faktoren scheint vielen Menschen nicht klar zu sein. Aber auch im Vorsorgebereich konnten beträchtliche Mängel aufgedeckt werden. Nur rund die Hälfte der befragten Personen konnte die entsprechenden Fragen richtig beantworten. Als vertrauenswürdigste Informationsquellen wurden Zeitungen/Zeitschriften, Familie und Freunde sowie der Anlageberater genannt. Nachgefragt werden entsprechend vor allem persönliche Beratungen, sowie schriftliche Informationen, welche aber gemäss der OECD Studie keine wesentlichen Auswirkungen auf das Finanzverhalten haben. Vorträge und andere öffentliche Veranstaltungen schneiden hierbei eher mittelmässig ab. Eher überraschend ist, dass mehr als 50 % der Befragten daran interessiert sind, ihr Finanzwissen auszubauen. Wir vermuten deshalb, dass ein hohes Potential für zukünftige Finanzausbildungen gegeben ist. Aufgrund der obigen Erkenntnisse sind wir überzeugt, dass auch in der Schweiz Handlungsbedarf zur Verbesserung des Finanzwissens besteht. Wir schlagen deshalb ein Ausbildungsmodell vor, das bereits in der obligatorischen Schulzeit beginnt. Damit kann bereits in jungen Jahren das notwendigste Grundwissen im Finanzbereich erlangt werden, welches später laufend ausgebaut werden kann. Personen welche auch nach dieser Ausbildung nicht über das notwendige Basiswissen verfügen, sollten sich dieses Wissen in zusätzlichen öffentlichen Veranstaltungen aneignen. Zu diesem Zweck wäre eine Zusammenarbeit mit Banken und Versicherungen sinnvoll, welche solche Schulungen für ihre Kunden anbieten könnten, da wir davon ausgehen, dass ein Kunde mit besserem Finanzverständnis auch ein rentablerer Kunde ist. Für Personen welche über das finanzielle Basiswissen verfügen, wird ein Programm zur Wissensvertiefung empfohlen. Dabei geht es darum, gezielt Wissenslücken zu schliessen. Deshalb drängt sich hier ein modular aufgebautes System auf, so dass je nach Situation und Bedürfnissen der einzelnen Personen entsprechende Kurse besucht werden können. Hier schlagen wir eine Mischform aus Einzelberatung, öffentlichen Veranstaltungen und Selbststudium vor. Dies könnte wiederum in Zusammenarbeit mit Finanzinstituten, aber auch mit öffentlichen oder privaten Schulen erfolgen.In 2005, the Organization for Economic Cooperation and Development OECD published a study on financial education at an international level, entitled "Improving Financial Literacy: Analysis of Issues and Policies". It revealed that a large proportion of the population has very limited knowledge of financial issues and that the general level of knowledge is grossly overestimated. In addition, it became clear that people find it difficult to find and to grasp pertinent financial information. Similar results supporting these findings were yielded by two other studies conducted in Germany. Switzerland was excluded from these studies, which is why Investor’s Dialogue, a financial consulting firm, commissioned a new study, conducted as a semester assignment at the Zurich University of Applied Sciences ZHAW, to establish whether, and to what extent, such problems exist in Switzerland. Financial education is gaining in importance. Increasingly, different areas of the world of finance require us to place more emphasis on taking care of our own financial affairs. This is a topic of some significance, in particular in the context of developments in the field of retirement planning. This shift towards assuming more personal responsibility in money matters can however only be successful where there is enough fundamental knowledge in financial matters. A survey entitled "Financial Literacy in Switzerland” was carried out using a questionnaire which was sent to private citizens, ZHAW students and ZHAW staff, as well as to two Swiss companies. The questionnaires which were returned and analyzed yielded the following results: The surveyed individuals consider themselves to be quite knowledgeable in financial matters. In answer to one question, the subjects replied that it was no problem for them to explain different financial products. However, when the participants’ self-assessment was put to the test, it became evident that, for the most part, their actual level of knowledge was considerably lower than they had assumed. In fact, the less actual financial knowledge they had, the larger the gap between self-estimation and real knowledge. A major problem consists of knowing how to assess financial risks and rates of return. Many people do not seem to be able to understand the relationship between these two factors. Another area where there is a great need for more knowledge is retirement planning. Only about half of the respondents were able to answer the relevant questions correctly. When asked to identify reliable sources of relevant information, they listed newspapers and magazines, family members and friends, as well investment consultants. Accordingly, people mostly seek advice from investment consultants or consult written information, which according to the OECD study does not have any significant effect on financial behavior. Lectures and other public events were rated to be rather mediocre in terms of usefulness. Surprisingly, more than 50% of all respondents claimed to be interested in learning more about handling their finances. We therefore suspect that there is considerable potential for financial education. Based on these insights, we are convinced that there is a demand in Switzerland for products to develop financial knowledge. We thus propose a new educational scheme: Learning about the complexities of finance would be part of compulsory school education. This would enable students to acquire the basics of personal finance and money management at an early age and enable them to continuously enhance their knowledge as they get older. Anyone who lacks the necessary basic know-how after completing their education should attend additional public functions in order to acquire that knowledge. To this end, it might be advisable to cooperate with banks and insurance companies, which could offer financial seminars and educational activities for their clients. After all, well-informed clients with a broader knowledge of financial matters are likely to be more profitable, as well. People who already have a basic understanding of all things financial are recommended to take part in a program to enhance their financial knowledge. This will be aimed at closing critical knowledge gaps. The type of program most suited to this goal would be a modular system which would offer specific courses according to the individual situation and the specific needs of every investor. A combination of personal investment advice, public seminars and self study might be advisable here. Such courses might once again be offered in cooperation with financial institutions and/or with public or private schools