Articles from Cass Knowledge

Attaining retirement bliss - why it's time for investment to do more of the heavy lifting

Adding one per cent per annum to long-run risk-adjusted returns really is the difference between retirement bliss and retirement penury.

Unlike defined benefit (DB), with its increasingly negative cash flow and de-risking focus, defined contribution (DC) has positive cash flow and a growth focus. Most DC schemes also have a very long investment horizon. However, most DC schemes, DC default funds in particular, still predominantly invest, via insurance platforms, in highly liquid asset classes. As a result, most are missing out on the many longer-term illiquid asset opportunities and the associated illiquidity and complexity risk premia that populate the asset portfolios and returns of most DB schemes. These can potentially add as much as one per cent per annum to long-run risk-adjusted returns.

By advancing DC investment governance to leading-edge DB standards, DC schemes would be well placed to embrace those asset classes and investment techniques increasingly utilised by DB schemes, such as investing in real estate and social and renewable energy infrastructure and better integrating ESG factors into investment decision making. Doing so really could be the difference between retirement bliss and retirement penury.

The thought leadership paper It's time for investment to do more of the heavy lifting is available for download at the link below.

Attachment(s)

{It’s time for investment to do moreof the heavy lifting - Generating better DC outcomes through improved investment governance and innovative investment thinking.}{https://www.cass.city.ac.uk/__data/assets/pdf_file/0007/477772/en-generating-better-dc-outcomes.pdf}