Weitere ähnliche Inhalte Ähnlich wie Investing in a low return world (20) Mehr von London Business School (20) Kürzlich hochgeladen (20) Investing in a low return world1. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 1
Investing in a low-return world
Elroy Dimson, London Business School
(Joint work with Paul Marsh and Mike Staunton)
2. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 2
0
2
4
6
8
US Jap UK Eur Wld US Jap UK Eur Wld
Since 1950 Since 1980Equities Bonds
Annualizedreal returns on equities and bonds (%)
Baby boomers Theirchildren
The high-return world (we grew up in)
Past performance conditions our thinking and aspirations
0
2
4
6
8
US Jap UK Eur Wld US Jap UK Eur Wld
Since 1950 Since 1980Equities Bonds
Annualizedreal returns on equities and bonds (%)
Baby boomers Theirchildren
0
2
4
6
8
US Jap UK Eur Wld US Jap UK Eur Wld
Since 1950 Since 1980Equities Bonds
Annualizedreal returns on equities and bonds (%)
Baby boomers Theirchildren
3. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 3
Falling yields generated a golden age for bonds
10.4
2.5
12.5
2.7
0
2
4
6
8
10
12
1900s 10s 20s 30s 40s 50s 60s 70s 80s 90s 2000s 10s End-
2012
USA UK
Averageyields on long government bonds (%)
To extrapolate the last 30 years’ bond returns would be fantasy
4. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 4
300 years of UK bond yields. What is “normal”?
4.5
0
5
10
15
20
Long-run average
The high bond returns since 1980 were not “normal”
5. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 5
Real yields: The race to zero and beyond
-1
0
1
2
3
4
00 01 02 03 04 05 06 07 08 09 10 11 12 13
US UK Fra Ger Jap Can Swe
Realyield (%)
Default-free, inflation-protected bonds now yield less than zero
6. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 6
Prospects for real asset returns
Long-term index-linked bonds
– zero or marginally negative
Long-term conventional bonds
– marginally positive
Bills/cash (long-run, rolling)
– marginally negative
Equities
– bills + equity premium vs bills
But do equity returns vary with the real interest rate?
0.7
2.2
-2.1
0.4
3.9
-3.1
-0.6
3.3
-0.7
-4
-2
0
2
1900–1980 1981–2008 2009–2012
USA UK All Yearbook
Averageannual real
interestrate(%)
7. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 7
Equities next 5 years % p.a. Bonds next 5 years % p.a.
Real asset returns versus real interest rates
Real interest rates impact real equity returns
-1.7
3.0 3.0
3.9
4.8
7.0
8.9
11.5
-6.6
-1.9
1.7
3.3
5.0
7.6
-11
-2.2
0.1
1.5
2.9
4.8
9.4
-15
-10
-5
0
5
10
Low 5% Next 15% Next 15% Next 15% Next 15% Next 15% Next 15% Top 5%
Real interest rate boundary %
Percentiles of real interest rates across 2,160 country-years
Real rate of return (%)
8. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 8
Likely future returns
0
2
4
6
World
since
1950
World
since
1980
World USA Japan UK Europe Emerging
markets
Historical high returns Prospective lower returns
Equities Bonds
Annualizedreal returns on equities and bonds (%)
We are indeed living in a low-return world
9. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 9
Optimism and stress
Unrealistic return projections
asset managers’ targets
pension plans, especially in US
retail product projections
automatic enrolment pensions
Stresses from low returns
DB pension plan deficits
unfunded pension plans
DC contribution rates
saving rates generally
charity/endowment spending rules
pressure on management fees
10. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 10
The low return world
Currently, investors’ prime concern
Low yields have been obvious for some time
– less obvious returns will be lower on all assets
Some investors in denial
– expect rapid return to “normal”
– but period since 1980 not “normal” for bonds
– second ½ of 20th century not “normal” for stocks
– also, be careful what you wish for ...
Our projections: long-run and fallible, but realistic
Optimism misleads, and masks need for remedial action
The Yearbook is downloadable from www.tinyurl.com/CSgiry2013
11. Copyright © 2013 Elroy Dimson, Paul Marsh and Mike Staunton, London Business School LBS Asset Management Conference, Friday 19 April 2013 Slide 11
Concluding remarks
We are in a low return world
Investing has become more challenging
Need to search for rewards that go
beyond just the equity premium
Need to control risks, and to diversify
across assets, markets, and premia
The Sourcebook is available via www.tinyurl.com/DMSsourcebook