# Quinn Life SSIA 1 Year On



## Bearish (5 Jun 2002)

Ok, so I feel like a bit of a moan.

I took out an SSIA in May 2001. One year on and I can say I'm not at all pleased with the performance of the fund. Im fully invested in the Eurostoxx 50. Even though I've been drip feeding funds in each month I estimate that I'm down around 9% on the year. Add in a manageemnt charge of 1% and inflation of 5% and Im looking at a real loss of -15%! Not a great advertisement for Quinn-Life by any standards.


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## Red (5 Jun 2002)

*Inflation*

Is "Bearish" Charlie McCreevy in disguise.  Really, the inflation rate is Quinn Life's fault! Honest!


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## Bullish (5 Jun 2002)

*One Year On*

Canada Life SSIA invested in Focus 15 is down 12.8% on total amount invested. Can't say I'm as depressed as Bearish though  :shamrock


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## Lucretia1 (6 Jun 2002)

*Re: One Year On*

Bearish - You state yourself that you're fully invested in the Eurostoxx 50.  The QL fund simply attempts to track this stock index as closely as it can.  Quinn Life have no input into the management of this fund.  If it's down, that's because the index is down - you can't blame Quinn Life for that.  

At least Bullish can wag a finger at Setanta for the poor performance of the Focus 15 fund, as it is actively managed by them.  Mind you, it won't do any good!


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## Troy (6 Jun 2002)

*Deo Gratias*

Thank Zeus that only 2,600 out of 1.25 million SSIA subscribers followed Eddie Hobbs' and AAM's advice to invest in Quinn Life.  :rolleyes 

PS We hear lots of calls for apologies from a venerable institution.  When is EH and AAM goin' to apologise for so flagrantly promoting Quinn Life?:mad


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## rainyday (6 Jun 2002)

*Re: Show me the numbers*

Hi Troy / others - Have you any reason to think that QL trackers performed worse than the indices they track? Show me the data!


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## Troy (6 Jun 2002)

*Tracking the Eurostoxx*

That's not the point, <!--EZCODE ITALIC START-->_ rainyday_<!--EZCODE ITALIC END-->,  I am sure Quinn Life did exactly what they said on the tin.  The point is that tracking the Eurostoxx blindly for a five year SSIA was daft as a brush in the first place.:rolleyes


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## Bearish (6 Jun 2002)

*Quinn-Life*

I should really rephrase my initial moan. I am not blaming Quinn-Life directly for the poor performance of the EuroStoxx, although they are the seller of the product. You dont go back to the factory with a broken TV you head straight for the retailer. That said I realise that the markets are down and that is the product I bought. My point was that 15% of my investment has been eroded via, poor markets, charges and inflation. I was wondering how other people's SSIAs had performed over the last year. If this keeps up there will be a lot of unhappy people in a 5 years. Also while I realise that equity investments are a longterm play, the markets have been down in 2000,2001 and it looks like will be down in 2002. I dont think there has been a 3 year bear market since the 1970s.


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## Dogbert (6 Jun 2002)

*Pray Tell More*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> tracking the Eurostoxx blindly for a five year SSIA was daft as a brush in the first place<hr></blockquote><!--EZCODE QUOTE END-->. Why's that, Troy ? I don't see that it's any different to any other equity-based SSIA.


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## Investor (6 Jun 2002)

*Markets down*

I have an equity based SSIA, and strange as it may seem, I would prefer that markets are down in the first couple of years of the SSIA.  The essence of the SSIA is that you are drip feeding into it on a monthly basis.  When market is down you are buying in low.  

Obviously, I am looking forward to markets regaining momentum after the first couple of years.  The Eurostoxx 50 index had gains of between 25% and 48% pa in the years 1996-99.  Great, if you had your lump sum built up before 1996.  The point is, buying into equities in a depressed market is a good idea.  Have your lump sum build up before the markets rise again.

On Troy's point about buying into equity funds for the 5 years of SSIA's.  Most equity funds will allow you to continue with your investment after the term of the SSIA so you will not have to encash on the 5 years deadline (of course you will have to pay tax on any growth at that point).  What is daft is to invest in equities and expect the smoothness of growth you could get from a deposit based SSIA while at the same time look forward to equity like returns.  There is the "risk/reward" trade off that any investor must accept.


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## Bearish (6 Jun 2002)

*Buying Low*

Investor,

many people thought they were "buying low" when they bought the Nasdaq at 3000 about 8 weeks following its collapse from 5000 in March 2000. Market timing rarely work.

You say you are "looking forward to markets regaining momentum after the first couple of years". Just how many years are you hoping is a couple and surely you dont think you'll see a return to the bull market of 1990s?

By any measure stockmarkets are still overvalued relative to their long-term averages. Low interest rates maybe cushioning some of the pain for now, buts it only a matter of time before they go back up again, especially with the dollar collapsing.


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## Investor (7 Jun 2002)

*Buying low*

I started my SSIA (a Eurostoxx 50 tracker with Quinn Life) in January 2002 on the basis that the Eurostoxx 50 index had fallen 20%+ over the previous year.  I decided on taking a gamble with equities knowing that equities had, based on past performance, outperformed all other forms of investment over the last hundred years. 

Saying that, I know past performance is no indication of future performance.  I don't expect the bullish market seen in the 1990's to return over the five year period of the SSIA and agree that markets may still be overvalued.  I am looking at my investment over the long term (as equities should be looked at) and using the SSIA vehicle to buffer any short term losses and to build up a fund in equities.  At the moment I am prepared to take the risk for the potential return.  Bearish, can I ask what motivated you to invest in equities in May 01?

I must pull you up on the 5% inflation.  This is a mute point because any investment be it equities, cash deposits, property and indeed our investment in our working week has been hit by the same inflation rate.  

The QL's 1% charge must be compared to the other equity based SSIA's on the market, from memory some were charging 5% (now there's a loss).  The calculation of the charge is also important, the 1% charge is taken from the daily value of the unit price in unit linked funds so it may already be included in the 9% loss estimate you made.  This of course also means that it is not 1% of €3,804 (assuming €254 + Gov €63 by 12 months) but 1% of the first instalment, 1% x 11/12 of the second instalment and so on.  This works out at less that 1%pa of your overall fund because of the way SSIA’s are increased on a monthly basis.

If we analyse deposit based SSIA's in the same way as you analysed the equity SSIA then you still have a loss (and no real prospect of ever having real gains given the EU's commitment to keeping interest rates low) i.e. say 4% interest rate - 5% inflation.

Not to add to your woe’s but did you notice that the Eurozone equities dropped by over 3% on Tuesday due to “Enron” type concerns in European markets, although they have rallied slightly since.  We must hold our nerve and whatever you do avoid the temptation to ring QL to find out the current value of your fund!


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## Bearish (7 Jun 2002)

*Returns*

I got in in May purely for the issue of residency. I knew that I’d be leaving Ireland in the meduim term and wanted to get in my 2 years residency status asap – 25% was just too good to give up. To be honest the only reason I invested in equities was I knew the government contribution would likely be covering my losses, while at the same time I had the potential opportunity of some upside.

Investor I have to disagree with the way you are comparing the returns on different assets. Firstly you cant say inflation of 5% is a mute point. As a mobile worker within the EU, I don’t have to necessarily live in a country with 5% inflation, Europe’s 2.5% is probably more meaningful for someone like me. That said I think its important to look at the real return of the country you are currently residing in even if its not the one you will ultimately end up in.

Your analysis of deposits assumes that 1) interest rates wont go up and 2) that Irish inflation stays at 5% 3) doesn’t take account that you don’t have to pay a 1% management charge. I really believe that when comparing any investments you need to look at real returns less charges. While I take your point regarding how charges are calculated, I’d be very surprised if QL didn’t charge at the end of the year. My real return is still –15% no matter what way we care to look at it. It’s a given that equities are a long-term investment, although Eircom shareholders may not agree. However while equities have tended outperformed other assets over the long-term, there have been plenty of 5year periods where bonds or cash have outperformed. Blindly buying equities and holding for 20-30years is a very lazy strategy that I think can destroy wealth or at the very least lead to below par returns.

I’m not all that concerned with how the market have reacted to Enron scares. What is more worrying is that both the ECB and MPC left rates unchanged and markets still fell. I don’t like to think what they would have done had rates risen!


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## Investor (7 Jun 2002)

*Rates and Charges*

I've checked with QL on 1% charge, it is as I said a daily charge on the unit price and not a 1% charge at the end of year.  You had me worried there for a sec.

On inflation, I'm afraid we are stuck with Irish inflation rate when comparing SSIA's returns as you could not invest your SSIA in another country. 

When I was comparing the return on deposit SSIA I was looking at the same time frame as you i.e. May 01-02, and that would be about 4%-5% with usually no charges.  The fixed rates offered over 3 and 5 years by mortgage lenders would suggest that those in the know (or think they are in the know) are not predicting any significant increase in interest rates over the next few years, maybe 2-3% up but no more.  Low interest rates over the medium term could fuel inflation, so by the way could lump sums being released from SSIA's in four years time, and even spending prior to the end of SSIA's in anticipation of money becoming available.  

I would not recommend blindly holding equities over the long term.  I recommend active management of investments through regular reviews.  My strategy would be to buy with markets falling and sell when the time is right to lock in profits.  That's when the crystal ball really does start to come into play!  It is possible that I will become more risk averse as the lump sum grows but at the moment I am happy to stick with equities.


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## Dogbert (7 Jun 2002)

*Troy ??*

Still no word from Troy as to why he thinks investing in the EuroStoxx index was "daft as a brush" for SSIAs. As I said, I can't see why it's different to an other equity SSIA.


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## CM (8 Jun 2002)

*QL SSIA performance*

I believe that anybody who can't stomach the market volatility inherent in QL's index tracking SSIAs could always switch to their Bond fund - but obviously at the cost of reduced potential gains. Alternatively one could theoretically switch to another provider altogether including a deposit option... Just a thought...


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## Troy (9 Jun 2002)

*Index Tracking*

<!--EZCODE ITALIC START-->_ Dogbert_<!--EZCODE ITALIC END-->, is there any index which you would concede that it would be daft as a brush to blindly follow?  The Moscow SEQ? Taiwan SEQ?  Columbian SEQ?  Indian SEQ?  Hang Seng, NASDAQ, Nikkei, etc. etc.

QLD/EH chose Eurostoxx 50 because with only 50 stocks to track you could do it with an actuarial student and a dog and it had a certain illusory ring of conviction.

Oh, and then we had this report showing that blindly following the Eurostoxx 50 beat the sox of any of your conventional managers  over all historical perspectives.

EH really warmed to this populist theme ignoring completely that the short history of the Eurostoxx 50 was absolutely <!--EZCODE BOLD START-->* NO GUIDE WHATSOEVER*<!--EZCODE BOLD END--> to its future prospects.

If one must invest in equities do so in a diversified, preferably actively managed, portfolio.  A blind punt on the EuroStoxx was and still is gambling.  If you wish to make this punt do it through the medium of Tracker Bonds which guarantee you a return of your capital.  With this guarantee of capital a punt on an Index (any Index) changes from being a gamble to being an investment, albeit a rather cautious one.

To revert to the earlier post, do EH and the other populists ever apologise?  Here we are a year later and the Eurostoxx 50 was just about the worst punt they could have advised.  What do they respond?  "One should take the long term view".  In other words, they are never, never wrong and they never, never, never apologise.:rolleyes


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## Dogbert (9 Jun 2002)

*Indices*

I didn't say you should track any old index, Troy, but fair enough ... make that any major diversified index. I would have thought (though I confess I haven't studied it in any detail) the Eurostoxx 50 would fit that bill.

Don't agree with you that active managed portfolios are preferable to indexing. The evidence is clear on this. Around 75% of active managers underperform their index benchmarks, in good markets or bad, and they cost you more in charges for the privilege. If I had to pick an active manager, I doubt I'd pick any of the Irish ones (other than maybe BIAM), but would look instead at the major international houses, which weren't available for SSIAs.

By the way, I think I'd take some of the indices you list over the ISEQ (though again I'd have to look harder at them before I commit for sure) !


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## rainyday (9 Jun 2002)

*Re: Show me the data*

Hi Troy - Got any data to back up your preference for active management of funds?


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## Falcontit (9 Jun 2002)

*Index funds*

Hi Troy,
It seems you've got it This post will be deleted if not edited to remove bad language about front. A decline in markets in the first year or two, follwed by a lift is a good prescription, not a bad one. Secondly Europe is the hot tip as best region currently. Thirdly it's within our currency zone, and is our largest stock index. You're argument is like suggesting that Yanks shouldn't invest in the Dow Jones, in favour of US active managers.

Buying the main european index at only 1%, some one third cheaper than the local life market I thought was a good idea for equity investors, and I took the advice. Over the five years and beyond I believe that the pattern of active management underperformance will continue. You've offered no evidence whatsoever to counter this view, only opinion. You take a stock market fall to bash trackers, but the fall has been felt across the board, and especially among the actively managed focused fund groups.


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## Paster (10 Jun 2002)

*Eurostoxx*

The equity proponents saw the SSIA as just another vehicle to buy some more stock with free Government money thrown in, and the pressure on charges, led to a very competitively priced market. Many life offices promoted their wares, with Quinn's leading the way on costs. All providers had a valid message, and to single out tracking the Eurostoxx 50 as invalid, is illogical. I agree with Falcontit.

The facts are that Mc Creevey launched the SSIA in the teeth of a market Bull run that lasted several years. Now we've the hangover. But that's the nature of markets. In the array of choice available index tracking is a vital development, one at the core of the largest player, Irish life. To argue that tracking the largest European currency zone index is wrong, or inferior, is simply unsustainable. I don't expect Troy has anything to offer in the active vs tracker defense, other than emotional thinking.


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## Troy (10 Jun 2002)

*Index Tracking*

Hi <!--EZCODE ITALIC START-->_ Falcontit_<!--EZCODE ITALIC END--> and <!--EZCODE ITALIC START-->_ Paster_<!--EZCODE ITALIC END-->,

First of all I am glad that <!--EZCODE ITALIC START-->_ Falcontit_<!--EZCODE ITALIC END--> is glad that the Eurostoxx 50 has bombed out, all according to plan - buying more units on the cheap and all that. 

You can prove anything with statistics. Shane Ross even proved that a chimpanzee throwing at a dartboard could beat a professional Investment Manager.  Basically, if you <!--EZCODE UNDERLINE START-->want<!--EZCODE UNDERLINE END--> to "prove" it you can.  I am not going to indulge in that game.

Instead, I revert to some common sense.  Why do institutions pay megabucks to these investment managers?   Why do the vast bulk of Pension Fund Trustees still entrust their funds to professional investment managers?  (Index tracking is very much the poor man's sport).

Arguing that professional investment managers don't add value is really saying the whole thing is a lottery, no sense or science to it whatsoever.  If you believe the whole thing is a lottery you shouldn't be encouraging people to invest in it at all.  Cynicism has its own inexorable logic!

QLD chose index tracking (of 50 stocks) because it was the only viable option on 1%.  They then sought to "prove" their iconoclastic approach, first by recruiting EH, always willing to spit at an icon, and then by chosing the statistics to prove their case.:rolleyes


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## rainyday (10 Jun 2002)

*Re: Index Tracking*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Why do institutions pay megabucks to these investment managers?<hr></blockquote><!--EZCODE QUOTE END-->

Why? - Simply because they can find lots of people like you willing to pay the megabucks in fees without seeing any evidence that they actually add value!


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## Troy (10 Jun 2002)

*I'm winning!!*

That last cheap shot by <!--EZCODE ITALIC START-->_ Rainyday_<!--EZCODE ITALIC END--> proves I'm winning.:lol :lol


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## CM (10 Jun 2002)

*I'm winning!!*

Hmmm....methinks it's time to move this malarky to  or  forums... :rolleyes


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## Dogbert (10 Jun 2002)

*Winning ??*

No Troy, what might prove you were winning was some evidence to back up your case. Rather than cite the megabucks active managers pay their staff, show us the results they generate.

As I said earlier, the evidence is clear. 75% of active managers underperform their index benchmarks - pretty much every market, pretty much every period, good markets and bad. In fact, active management is certainly <!--EZCODE BOLD START-->* not*<!--EZCODE BOLD END--> any longer the choice of most pension trustees - just ask Irish Life, as Paster has pointed out, how much business they've won for their index funds over the past few years. Why ? Because no active manager, with the exception of BIAM, has consistently outperformed. So BIAM are getting all the active mandates, and IL are getting all the rest.

If I'm going to choose an active manager, then I'd insist on the worldwide players whose scale and scope gives me some hope they can add value. But these guys weren't available for SSIAs.


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## slipstream (10 Jun 2002)

*proactive*

The index tracking folks are effectively sticking with the top x number of shares, but the top x number of shares are there because the large actively managed portfolios have effectively put them there.

Index trackers are simply along for a free ride and the efforts of the managed funds. It all decends into a great gamble when the balance falls to much in favour of Index tracking.

Am I on the right track here?


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## Brendan Burgess (10 Jun 2002)

*Reroactive*

Slipstream, your analysis of trackers is spot on. If everyone invested in trackers and there was no active fund management, the market would only move in line with funds flowing into or out of such trackers (assuming companies failed to issue new stock). However due to human nature there will always be people trying to beat the market and willing to pay dearly for it. So you have to ask yourself the question whether it’s the person trying to beat the market, or those piggy-backing on the cheap, that is the cleverest investor


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## Troy (10 Jun 2002)

*Active vs Tracking*

Hey, I'm not a fund manager, anybody out there goin' to support me?

<!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END-->, as I understand the situation, Irish Life use the consensus of fund managers rather than index tracking for their pension clients.  This is in fact the ultimate endorsement of active fund management, don't you think?

Also, I think when it comes to your big schemes, like your ESBs etc. active fund management is still <!--EZCODE ITALIC START-->_ de rigueur_<!--EZCODE ITALIC END--> with beauty parades and all that.

Moreover. that daddy pension fund of them all, Charlie's White Elephant, was farmed out mainly to active fund managers.  Why didn't NTMA just hand over the 5bn to Quinn Life (I'm sure they could have negotiated the 1% down to .01%)?:rolleyes


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## rainyday (10 Jun 2002)

*Re: Active vs Tracking*

Ok then - let's sum up - Troy recommends active tracking because lots of other people seem to be doing it!


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## Paster (10 Jun 2002)

*Correction*

Troy, the first actual fact you've stated,( other than opinion) is wrong. How can we take your view seriously?

ILAC's Consensus fund uses index tracking tactics, after examining mixed fund make up. Apart from that, ILAC has a plethora of other index funds. I can't understand why you stick to a theme, starting out by having a go at the Eurostoxx 50, without a scintilla of evidence to support your view. You seem to be fixated with 'EH', is that it? 

If so, at least tell us, rather than go around in circles?


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## Dogbert (11 Jun 2002)

*Indexation*

Also Troy, didn't I read recently that CIE had given IL €400 million to manage on an indexed basis.  They also appointed BIAM and an international manager (can't remember who) for active management.


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## Troy (11 Jun 2002)

*Me against the World!*

Now I know how Eamon Dunphy feels. 

<!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END--> either index tracking is superior or it is not.  So now we see that CIE aren't quite so sure.  I try to answer your questions (except I have no data).  Can you answer one of mine?  Was the NTMA wrong (IYHO) to use active managers?:smokin 

PS - I agree with <!--EZCODE BOLD START-->* CM*<!--EZCODE BOLD END--> that this thread has now reached the necessary qualifications to be promoted to the Discussion Fora.  I leave it to a Moderator to decide which.


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## Liam D Ferguson (11 Jun 2002)

*Re: Me against the World!*

<!--EZCODE BOLD START-->* "Now I know how Eamon Dunphy feels."*<!--EZCODE BOLD END-->

So will we be expecting a tired and emotional post early tomorrow morning?  Don't worry, though, Brendan won't suspend you.   

By popular demand, I'm moving this thread to The Great Debates.


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## Dogbert (11 Jun 2002)

*Indexation*

Hi Troy,

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Doggie either index tracking is superior or it is not.<hr></blockquote><!--EZCODE QUOTE END-->

Superior to what, Troy ? My comment was that it was superior, imho, to the active managed offerings available for SSIAs. I said if I had to choose an active manager I'd choose BIAM or a leading international firm (eg Fidelity). Looks like CIE have reached a similar conclusion in a different context, and that, their investment being somewhat larger than your typical SSIA, they decided to hedge their bets a bit.

I don't know for sure, but I don't think the NTMA <!--EZCODE BOLD START-->* is*<!--EZCODE BOLD END--> using only active managers. Didn't BIAM win a sizeable mandate for its indexed partnership with State Street ? (If anyone else can confirm this, then Troy is wrong on the second, of two, "facts" he has contributed to this debate.)

As for the Dunphy analogy, might I suggest that, like Eamo, you brought it upon yourself by an ill-informed rant against an indeterminate target. Let's go back to first principles ... can you tell us precisely why you think investing SSIAs in the EuroStoxx index is "daft as a brush" ??


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## Troy (11 Jun 2002)

*Why was Eurostoxx Daft as a Brush?*

Coz its bombed out.:rolleyes


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## Falcontit (11 Jun 2002)

*Eurostoxx 50*

The index reflected the reduction in valuations in Europe's largest 50 plc's. 'Bombout' is hardly descriptive. This thread is at an end, with Troy, apparently unable to produce a case, and running out of provocative and opinionated comment. Give it a rest.


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## Troyzer (11 Jun 2002)

*Troy's Pronouncements revisited.*

"My understanding is that the big banks are actually offering the best deposit deals". Another of Troy's wonderful 'facts'. Jan 24th.


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## Troy (11 Jun 2002)

*Dunphy fights on*

<!--EZCODE ITALIC START-->_ Falcontit_<!--EZCODE ITALIC END--> declares the thread at an end.

<!--EZCODE ITALIC START-->_ Troyser_<!--EZCODE ITALIC END--> starts shooting the messenger (where did I hear that before?)

<!--EZCODE ITALIC START-->_ Paster_<!--EZCODE ITALIC END--> says<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> <!--EZCODE ITALIC START-->_ "ILAC's Consensus fund uses index tracking tactics, after examining mixed fund make up."_<!--EZCODE ITALIC END--><hr></blockquote><!--EZCODE QUOTE END-->Can I sum up this philosophy (if that not too grand a term for it) thus: 

(a) tracking just one index is not appropriate for most pension fund trustees, one must diversify into several.

(b)  in making such diversification active management adds value

Tracking just <!--EZCODE UNDERLINE START-->one<!--EZCODE UNDERLINE END--> equity index isn't suitable for Irish Life's pension clients.

It isn't suitable for NTMA.

It isn't suitable for CIE.

It isn't suitable for ESB.

<!--EZCODE BOLD START-->* And it isn't suitable for a five year SSIA*<!--EZCODE BOLD END-->:rolleyes


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## Dogbert (11 Jun 2002)

*More Nonsense from Troy*

Troy, corporate pension funds are very large and have an obligation to diversify across a range of assets - whether those assets are actively managed or indexed has nothing to do with it. SSIAs are small and difficult to diversify across a range of assets, although you could have selected a diversified managed fund, either active or indexed (eg IL's Consensus, via WisdomScope).

Your point 2 is utter nonsense. It's the mix of assets that gives diversification, and they could be all active, all indexed, or a combination.

Just to sum up, the core of this issue seems to me to be as follows. Choosing an equity-based product for a fixed 5 year term is somwhat risky. That's why the providers recommended that clients opting for equity SSIAs should at least have some ability to retain their investments for a longer period should market conditions warrant it. Once a client has decided on an equity SSIA, the evidence indicates that it is highly likely that an indexed one will outperform an active one - about a three-in-four probability. A client choosing an indexed SSIA is best served by an index that is well diversified, and one in the investor's base currency eliminates currency risk. An index of Europe largest 50 companies would seem to be an entirely reasonable option.

At least Dunphy had the grace to admit that he was "tired and emotional" !


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## Unregistered (11 Jun 2002)

*Great Stuff*

This is great stuff !

I am really enjoying it, a good mixture of fact and fantasy, plenty of passion, some logic and the odd cheap shot.

Keep up the good work lads.


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## SNOT (12 Jun 2002)

*Troy*

S'not fair on Toy, sorry Troy. He can't help it if he's a little lost. Too much CH2OH, n' Coke with Eamo. Makes it up as he goes along too!


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## Troy (12 Jun 2002)

*Doggie's bark is worse than his bite*

<!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END--> says<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> <!--EZCODE ITALIC START-->_ "Troy, corporate pension funds are very large and have an obligation to diversify across a range of assets ... SSIAs are small and difficult to diversify across a range of assets"_<!--EZCODE ITALIC END--><hr></blockquote><!--EZCODE QUOTE END--> Let me get this straight.  Corporate pensions have an obligation to diversify!! Is that some legal constraint to invest against their better judgement, or is it because of the exact opposite legal constraint to act in the best interests of their members?!

<!--EZCODE ITALIC START-->_ "SSIAs are small and Corporate Pensions are big"_<!--EZCODE ITALIC END--> is a really disappointing contribution from <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END-->.  Of course, you couldn't run your own individual SSIA on active managed fund lines but does <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END--> not realise that an SSIA invests in a collective unit linked environment many many times bigger than your average corporate pension. (Penny has just dropped. <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END--> must of course be referring to the QLD fund which would indeed be smaller than your average corporate pension   ).

In any case, can I have some fresh opposition, now that I have disposed with <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END-->. :lol


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## Brendan Burgess (12 Jun 2002)

*I'll have a go...*

Some gems from Troy:

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Thank Zeus that only 2,600 out of 1.25 million SSIA subscribers followed Eddie Hobbs' and AAM's advice to invest in Quinn Life. <hr></blockquote><!--EZCODE QUOTE END-->

 <!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> The point is that tracking the Eurostoxx blindly for a five year SSIA was daft as a brush in the first place<hr></blockquote><!--EZCODE QUOTE END-->

And when asked why tracking the Eurostoxx was daft as a brush. <!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Coz its bombed out<hr></blockquote><!--EZCODE QUOTE END-->

Why restrict your criticism to Quinn Life and Eddie? I would imagine that Irish Life and their RAIPIs have put far more customers into the SSIA Eurostoxx investment than Quinn Life. And Irish Life charged more for it!

Quinn Life offers their customers a choice of Eurostoxx, S&P 500 and the 20 largest Irish companies as well as bonds, technology and biotech!

By the way, Eddie was very critical of my recommendation of a balanced passive investment in Irish shares in preference to an investment in the Eurostoxx. I challenged him to explain why investing in huge European companies was any more likely to do better than investing in  blue chip Irish companies. But I challenged him at the time and not with the benefit of hindsight. My recommendation of a balanced portfolio of Irish shares has turned out to be reasonable, at this early stage. But had Irish shares bombed more than comparable investments, I would feel no need to apologize.


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## Troy (12 Jun 2002)

*I've reached the final!*

Having disposed (rather easily) of <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END-->, I find myself pitted against the <!--EZCODE ITALIC START-->_ Boss_<!--EZCODE ITALIC END--> himself. 

I have noted his opening foray, which is distinctly lacking in killer punch, but I must consolidate my defences at this stage, no immediate response,  the title of <!--EZCODE BOLD START-->* The Great Debater*<!--EZCODE BOLD END--> is up for grabs here and I am not going to make any rash moves.


----------



## Troy (12 Jun 2002)

*Alcohol's my baby*

SNOT, I would never touch that CH2OH stuff.  Give me C2H50H any time.


----------



## Troy (12 Jun 2002)

*Preliminary Attack*

<!--EZCODE ITALIC START-->_ Boss_<!--EZCODE ITALIC END-->, what's wrong with the benefit of hindsight?  If someone gives me a tip and it turns out to be a flop, surely I can complain!  The only way to judge whether advice was good is with hindsight.:rolleyes 

Referee, that is not my complete defence, just I think I caught the <!--EZCODE ITALIC START-->_ Boss_<!--EZCODE ITALIC END--> a bit offside there. I don't think I deserve a goal but I am a bit in front at this early stage of the final.


----------



## Dogbert (12 Jun 2002)

*SSIAs*

Hi Troy,

I certainly don't feel I have been disposed of, although I'll leave that to others to decide.

Your contribution continues to be totally off the mark. Comparing large very long-term corporate pension plans with small relatively short-term savings plans is complete nonsense. When I said it was hard to diversify SSIAs I meant because the rules prohibited you using more than one provider. Of course you could choose a managed fund ... as I pointed out myself.

The fact is that SSIAs are entirely different in objective and regulatory controls than corporate pension plans. Proof ? Well how about the fact that most SSIA-ers chose deposits, which is just about as undiversified and as un-gorwth oriented as you can get. The investment objectives and investment risks are entirely different, and it's therefore not at all surprising that the different investors (ie SSIA-ers and corporate pension trustees) have responded differently.

But rather than let you constantly move the goalposts in your arbitrary way, how about you answer my previous summary of this debate, which was:
<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> Choosing an equity-based product for a fixed 5 year term is somwhat risky. That's why the providers recommended that clients opting for equity SSIAs should at least have some ability to retain their investments for a longer period should market conditions warrant it. Once a client has decided on an equity SSIA, the evidence indicates that it is highly likely that an indexed one will outperform an active one - about a three-in-four probability. A client choosing an indexed SSIA is best served by an index that is well diversified, and one in the investor's base currency eliminates currency risk. An index of Europe largest 50 companies would seem to be an entirely reasonable option.<hr></blockquote><!--EZCODE QUOTE END-->

Can you tell us which parts of this statement you disagree with and, precisely, why ?


----------



## Liam D Ferguson (12 Jun 2002)

*NTMA*

May I add one further correction to Troy's moronic poutings.

Far from being entirely actively managed, a visit to the NTMA website reveals that the national pension fund is actually 43% indexed. In fact, both the indexed US equity element and the indexed Eurozone equity element are actually larger than the actively managed element in each case. The active element wins out in Japan and the Pacific Basin, where markets are generally regarded as less efficient (hence active management more likely to add value) and in two global equity mandates, which presumably have the ability to trawl all areas of the world including emerging markets, where again indexation is less effective.

Troy keeps claiming to be winning this debate, even though there do not appear to be any posts agreeing with him. I certainly think he's talking through his horse's ass. Could other contributors perhaps post a vote on whether they agree with Troy's contention that choosing the EuroStoxx 50 Index for your SSIA is indeed as daft as a brush?


----------



## rainyday (12 Jun 2002)

*Re: NTMA*

I vote that Troy's contributions have been generally as daft as Mr Brush McBrush, Brush St, Brush, Co Brush.

I hear Troy's next campaign is to persuade us that the Saudi's actually won yesterday!


----------



## Troy (12 Jun 2002)

*Outnumbered*

I am about to give this up through sheer weight of numbers.  

A few passing comments though.

I feel I have let myself be pushed into arguments which I do not actually believe, or put another way I have been misrepresenting myself.

Thus, I accept that the evidence does seem to show that the historical added value of active management against their benchmarks is debatable, to say the least.

But I stick by my central point.  EH/AAM/Boss definitely had no qualms in advising 5 year SSIA customers into the single dimensional Eurostoxx 50 index ala QLD.

The <!--EZCODE ITALIC START-->_ Boss_<!--EZCODE ITALIC END--> has argued that QLD in fact had a range of such options.  That rather avoids the point which was that Eurostoxx 50 was promoted pretty well exclusively.

Wasn't this a dubious blanket recommendation (especially with hindsight)?:rolleyes 

PS If Ireland proceed any further in this silly game of grown men kicking around a leather ball, the economy will be in serious danger (excepting the drink sector of course).  The Saudis were most definitely the winners yesterday.


----------



## rainyday (12 Jun 2002)

*Re: Security Blankets*

Hi Troy - You have this remarkable ability to take a view which has no relation to the supporting data. You really should consider a career in politics.  

Check out the  from the SSIA forum. There is <!--EZCODE BOLD START-->* no recommendation, blanket or otherwise*<!--EZCODE BOLD END--> for any specific QL funds. Each of their funds are listed, not just the Eurostoxx - So can you tell use where AAM or the Boss made blanket recommendations for Eurostoxx.

BTW, is it time for you to declare any conflict of interests?


----------



## Honest Broker (12 Jun 2002)

*Triumph for Active Management*

Just had an updated perfomance sheet from Troy's (alleged) stable-mates at Hibernian re their Target 20 Fund.

The fund's return for the period 1/1/01 to 31/5/02 is quoted as -17.2%. Given this thread I wondered what the much-maligned EuroStoxx 50 had done over the same period. Which was -8.9%. A triumph indeed for active management! Guess Troy would characterise the Target 20 as having double bombed out. Hope he will be suitably harsh on the daft as a brush brokers who had the audacity to recommend Target 20 to their customers for SSIAs.


----------



## Bearish (12 Jun 2002)

*Not so Honest*

Can’t say I understand your numbers honest broker. Quinn Life Euro Stock was priced around €1.30 on 24/5/01. Its now around 90c. That’s a drop of 30.76%. You quote a period from 1/1/01-31/05/01. From what I remember the EuroStoxx was higher in Jan 01 than May 01. So the loss would have been even greater.


----------



## Embarrassed Broker (13 Jun 2002)

*Apologies*

You're right, Bearish. I keyed in the wrong dates. The figure I gave in my previous post for Eurostoxx was for 2002 to end May. The correct figure for the full period is -26.4%. So maybe there something to be said for active management after all. Apologies to all concerned for the error, and thanks to Bearish for pointing it out.


----------



## lambert (13 Jun 2002)

There is no doubting it but the eurostoxx 50 index is decreasing.  Since it recovered after Sept 11 it has bounced around between 3400 and 3800, but is now heading below 3200 down towards its Sept 11 lowest of 2740.  I don?t know what the value of the QL units are (I presume that someone has been monitoring these!) but I assume that their value more or less (probably less) reflects the movement of the eurostoxx50 index.  With an SSIA you (and I) are trapped into making contributions to a declining index.  Each day our contributions will automatically lose value as long as the index continues to decline.  There is no reason to believe that it will not continue to decline.  Also when (if) it bounces back it will probably go back to the 3400 ? 3800 level (or lower).  So if I were making lumo sum invesments I doubt that I would be investing in QL euro tracker until I could see that the index was on the up and going past the 3800 level.  But as we have monthly contributions all we can do is get down on our knees and pray for a strong bull market for say the last few years of the SSIA period.
That being said, 254 a month is not that much. It?s the price of a good prostitute and a couple of bottles of champagne ? average expenditure for most guys.  Let?s sit back and wait and see what happens to the index.


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## Paster (13 Jun 2002)

*Off the Point*

Troy, having read your submissions, there is hardly a statement you've made, or a line of thinking that stands up to the smallest scrutiny. Firstly it's clear you haven't a clue how Irish life's Consensus fund operates. Secondly you made similar sweeping statements about the national pension reserve fund, without the slightest effort to research. On both counts you introduced things that directly oppose your views! 

Next you state that BB and AAM, and EH promoted the Eurostoxx as the preferred SSIA. Neither did, but what's new. Nowhere did BB in my recollection make such a statement. Nowhere did AAM do so either, in fact most contributors promoted broker company offerings. Finally the Consumer report written by EH on it's site does not choose any investment strategy at all. If I recall the Eurostoxx debate originally arose on TV, as an alternative for the small lump sum investor to the advice from full service Irish stockbrokers represented on the programme by Davy's and Merrion- a valid context. 

In seven to eight cases out of ten, index tracking has beaten active management in the more efficient large stocks in Europe and US. But uninformed, and lacking the time or energy to study up, most people buy funds sold them, purely on past performance data, manipulated usually by picking a timeframe, usually a short one, and making wild interpretations. Just like you've done. Rarely are people told that most active management promises fail, and that a lower risk approach is index tracking. It's no panacea, and in a falling market it has no breaks, but in rebound and rising market it has no 'interference'. 

You've taken a 12 month timeframe,ie one statistical set and cast your comments accordingly. You've used unresearched, and embarrassingly inaccurate examples to prop up your bias, and failed. But still you persist. I'd hate to be a client of yours. Were you trained over a cup of coffe?


----------



## Troy (13 Jun 2002)

*I give up*

The only thing I haven't received in this thread is a pasting from <!--EZCODE ITALIC START-->_ Mithrandir_<!--EZCODE ITALIC END--> but then maybe he is a paster in another guise.

I have a basic rubric in life, a minority of one is in the wrong, even if she is right. 

All the world is against me.  I sense a secret society of Troy watchers, looking for my least slip.  I am afraid for my family.  

But maybe I have developed a spot of Dunphy like megalomania.

Which reminds me, I feel emotional and tired.

I've a touch of C2H5OH on board also.

Before final sign off; somebody, I can't remember who, asked for a declaration of conflicts of interest.

I am employed in a humble capacity by a rival of QLD and Hibernian.  I dare not give anymore away, lest my employer stumbles to my identity, in which case I truly would finish up without any conflicts.


----------



## CM (13 Jun 2002)

*Fevernova*

<!--EZCODE BOLD START-->* PS If Ireland proceed any further in this silly game of grown men kicking around a leather ball*<!--EZCODE BOLD END-->

Troy - the leather ball [broken link removed]! I also take issue with your casual use of the term <!--EZCODE ITALIC START-->_ grown men_<!--EZCODE ITALIC END-->! :lol


----------



## Unregistered (13 Jun 2002)

*Troy we need you*

Troy

Do not give up - we need someone to stir up the debate.

I think you did veer off every now and again but that's allowed. Equity investment requires careful consideration and I did sense a bit of "Eurostox50-great past performance-your only man-don't bother thinking about it" type of promotion.

Well that chicken has come home to roost.

Where customers have been sold on the basis outlined above, any institution selling likew that has a lot of soul searching to do.


----------



## Middenface McNulty (13 Jun 2002)

*Fevernova*

Troy,

I Really Hope Mithrandir Is Female.

Tolkien Rocks!!!


----------



## Rose (13 Jun 2002)

*Not Alone*

Troy,

Look here



and follow it through to here  



If you have the time.


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## Troy (14 Jun 2002)

*I haven't gone away you know*

<!--EZCODE ITALIC START-->_ Rose_<!--EZCODE ITALIC END--> thank me for those links.  With the protestations of innocence and various intimidatory tactics, including impersonation and (thin) disguise, I was beginning to doubt my own sanity.

There is absolutely no doubt that there was a "Eurostoxx 50 brigade" headed by Mr. Eddie Hobbs (let's not be coy).  

What a disaster that has been!

I have been accused of being confused in my arguments.  Well at least I have C2H5Oh to blame.

The Eurostoxx 50 Brigade vary their defence wildly between arguing that it is too short a time to judge, to denial (on the basis that all index funds were promoted equally), to it is good enough for the small man whilst admitting it is certainly not appropriate for professionals like NTMA or Irish Life Pension clients.

Gloves are off here - I resent the dirty tricks having been carried into the public fora - someone must be really hurting to stoop that low.

I will keep up my attack until I get the moral victory of the shutdown of this thread.:mad


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## Falcontit (14 Jun 2002)

*Campaign*

Troy, I invested in an indexed fund. But that's not the point. You're claiming that people you've named headed a campaign to tell people like me and others that the Eurostoxx 50 and QLD was THE way to go for SSIA's. That simply isn't true, as published reports show. 

The pasting you took was unfortunate, but justified because of the unsupported comments you made. Now based on the above links you're redigging the hole. If your last post is making a claim that cannot be supported with evidence, you should really withdraw it. I'm all for having a go, freedom of speech, and lively debates on matters, and I genuinely enjoy much of your input, but I don't think it's helpful to persue what appears to be an agenda against the people you've named thoughout this thread, without evidence. When you've evidence it's called stating a fact. When you none, there's a legal term for it.


----------



## Dogbert (14 Jun 2002)

*Give It A Rest, Troy*

Hi Troy,

That goes for me too, Troy. I've enjoyed debating with you both here and elsewhere on AAM, but you really do seem to have some other agenda going on here that is clouding your judgement. You've admitted that you've been reduced to posting views you don't actually believe yourself ! And certainly many of your comments have been way off the mark.

Just to be clear re EuroStoxx 50:
1. No one has produced any <!--EZCODE BOLD START-->* scientific*<!--EZCODE BOLD END--> basis for suggesting it was not a reasonable option.
2. It <!--EZCODE BOLD START-->* is*<!--EZCODE BOLD END--> too short a time to make a judgement on the success or otherwise of the investment.
3. <!--EZCODE BOLD START-->* Most (all ?)*<!--EZCODE BOLD END--> other market indices are also underwater for the period in question.
4. As are <!--EZCODE BOLD START-->* most (all ?)*<!--EZCODE BOLD END--> actively managed funds.
5. The one issue we do have categorial evidence for is that the <!--EZCODE BOLD START-->* vast majority*<!--EZCODE BOLD END--> of actively managed funds will underperform their relevant index benchmarks.
6. I certainly don't feel that the index was foisted on investors - it's a convenient, and currency matched, way of investing in Europe's largest companies, and was part of the package offered by one firm which was widely recommended because of its low charges. But there were <!--EZCODE BOLD START-->* lots of other options available*<!--EZCODE BOLD END-->, both from that firm and from others.

I and others have already dealt in more detail than I care to repeat with your disingenuous assertion that a view that "what's good enough for the small investor isn't good enough for large pension funds" somehow underlies all this, and, quite frankly, I think you have a cheek repeating it given the demolition it received last time, when even you yourself accepted at least some of the arguments.


----------



## Troy (14 Jun 2002)

*Last Fling*

Okay, Okay, <!--EZCODE ITALIC START-->_ Doggie_<!--EZCODE ITALIC END-->, lots of valid points there.

Just one theoretical observation I would like to make, rather tangential to the main theme, but you have alluded to it several times.

The is no risk reduction in the Eurostoxx 50 just because we now use the same currency in Euroland for valuing shares amongst other things.

It is possible to get Euro denominated versions of many indexes which have nothing to do with Euroland.

The value of BMW is quite unaffected by whether we denominate it in Euros or Dollars or whatever.  If it was denominated in Dollars we would have to do our calculation in two parts, (a) the $ change in BMW (b) the  € change in the $ leaving us back where we started viz. the change in value of BMW in our currency, the €.

The illusion that because we have all switched to denominating things in the same currency we have somehow removed a risk is an understandable trap, and I do not suggest that the proponents of this myth do so disingenuosly.  BMW is BMW is BMW no matter in what currency one prices the shares.:rolleyes


----------



## US (14 Jun 2002)

*Risk reduction*

Hi Troy

<!--EZCODE ITALIC START-->_ "BMW is BMW is BMW no matter in what currency one prices the shares."_<!--EZCODE ITALIC END-->

Of course it is.

The currency risk from investing in BMW (or any other share) does not depend on the currency in which a BMW share is quoted.  It depends on the currency in which BMW generates its earnings.

Investing in the Eurostoxx index (or any other Eurozone index) will reduce currency risk (as compared with investing in a non-Eurozone index) <!--EZCODE BOLD START-->* to the extent that the companies which make up the index generate their earnings in Euros*<!--EZCODE BOLD END-->.

I haven't researched this, but my expectation is that an index made up of companies whose primary listings were in Frankfurt, Amsterdam, Paris and other Eurozone exchanges would contain more companies whose earnings were mostly in Euros than an index made up of companies whose primary listings were in London or New York.  Hence I would expect a Eurozone tracker to have lower currency risk (for a Euro investor) than a US or UK tracker.  But I'm happy to be proved wrong.  And I'm sure somebody's done research into the exposure to different currencies involved in investing in the major indices.


----------



## Troy (14 Jun 2002)

*Currency Risk*

Thanks, <!--EZCODE ITALIC START-->_ UDS_<!--EZCODE ITALIC END-->, this one is far from simple.

I take your point, up to a point.  But there is even more depth to this debate.  Let's say BMW makes its profits mostly in Germany.  Hence an investment in BMW is substantially an investment in the Germany economy.

The success of the German economy has absolutely nothing to do with in what currency we quote BMW shares, we both accept that.

But the success of the German economy has only indirect links to the fact that transactions in that economy are now denominated in the same currency as Ireland.

Undoubtedly the single currency has brought some mitigation of risk in investing in Euroland but not nearly so pronounced as first impressions would suggest.:smokin


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## Falcontit (14 Jun 2002)

*What's this really about?*

I think we're going around in circles. The Eurostoxx 50 is a valid index, just like any other latge stock index whether it's in the UK for UK investors or the US for US investors. It has a valid role to play in investor choice. But that's not the issue it appears.

Troy, why have you singled out this, and attacked it so inaccurately? What's the real driver or agenda? Are you trying to associate the fall in the European market to personalities you'd like to hurt?

It seems that you are.  If so Troy, that's wasting everybodies time, has really no place here, ( move it to Letting Off Steam), and consider that really it's only damaging yourself. Being bitter does that.


----------



## Troy (14 Jun 2002)

*Paranoia?*

I have been considering that last posting by <!--EZCODE ITALIC START-->_ Falcontit_<!--EZCODE ITALIC END-->.

To be sure, I have been attacking what was intensive populist tilt at conventional wisdom and the high personal profile associated with that tilt.

But since I have never met the person and I do not know him personally, talk of personalising the debate or trying to hurt someone or being bitter is way off the mark.  

If that is the effect I am having on someone, then that's me finished with this thread - it was a mixture of fun and information but if people are getting that sensitive, it's run it's course.:rolleyes l


----------



## The Economist (15 Jun 2002)

*Currency Risk*

Interesting debate as to whether currency risk has been removed from investing in top Euroland companies because of the single currency.

Assets range from purely monetary assets like deposits and bonds to totally real assets like gold, commodities or indeed real estate.

Clearly, monetary assets such as German Bunds have had a significant currency risk removed by the adoption of the single currency.

On the other hand the future value of gold is quite unaffected by whether it is purchased in Chicago in Dollars, Jo'burg in Rand, Frankfurt in Euro, London in Sterling etc.

Equities tend to be regarded as much  more of a real asset than a monetary asset and so it would be largely true to say that no significant risk has been removed in investing in top European stocks by the arrival of the Euro.  There was no currency risk <!--EZCODE ITALIC START-->_ per se_<!--EZCODE ITALIC END--> in the first place.

Put another way,  it is well known that, all things being equal, a falling currency causes a rise in stock prices and vice versa.

The fact that we are currently witnessing both a fall in the Dollar and a fall in Wall Street is because both are suffering from the same malaise.  If say the Dollar had been pegged at its highs of a few months ago the fall in the stockmarket would have been even steeper because stock would have been quoted in an artificially high currency.

Anyway, why be a spoilsport,  salsesfolk love to trot out that investment in EuroStoxx 50 carries no currency risk, and neither it does, but it never did, no more than investing in FTSE or S&P carries any long term currency risk.  They all carry specific economy risk and since this also shows up in movements in currency it is understandable that the two get confused.


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## Dynamo (19 Jun 2002)

*Currency Risk*

Hi Economist,

I don't think it's as simple as your post suggests.

First of all, take real estate - the reallest (if you'll pardon the Americanism) of all assets. Quite clearly, the future value of real estate for a € investor <!--EZCODE BOLD START-->* is very definitely*<!--EZCODE BOLD END--> affected by whether it's located in Chicago, Tokyo, London, etc. There is no evidence that I am aware of that a falling currency necessarily causes real estate prices to rise. Perhaps that is because (a) all other things are rarely equal (ie there are usually extraneous factors involved), and (b) the real estate market is not global in the way that equities and bonds are.

Turning to equities, your proposition is that Nestle, for example, is a global company which happens to be headquarted in Switzerland, not a Swiss company, and that the currencies which impact Nestle's share price are those in which it earns its profits, not that in which its shares are denominated. A weak Swiss Franc will cause Nestle's overseas earnings to be more valuable, and will balance for an overseas investor any losses due to the weak Swiss Franc itself. (A Swiss investor will simply gain from the overseas profits.)

This sounds entirely rational. But unfortunately it's not borne out by evidence. Empirical studies have revealed a very weak correlation between equity prices and currencies in developed markets - pretty much zero, in fact, whereas you suggest there should be a strong negative correlation. (Equity prices and currencies are hugely positively correlated for emerging markets, and for bonds.)

It's perhaps not surprising that the correlation is weak in the short term. Again there's a body of academic evidence that suggests that stocks in certain categories of assets (eg based on capitalisation, industry sector, geography, etc) move together because of investor demand. This is probably exacerbated by the growth of indexation, where investors choose to buy or sell baskets of securities with little or no emphasis on fundamentals. You'd expect the rational argument which you advance to win out in the long term, though, as fundamentals (ie actual earnings) reassert themselves into stock prices. But it doesn't appear to be the case.

So Nestle behaves more like a Swiss stock than a multinational with a similar earnings profile. European multinationals behaved more like German, French, or Italian stocks than multinationals. And the advent of the Euro has indeed therefore eliminated at least some degree of currency risk for European equity investors.


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## The Economist (20 Jun 2002)

*How Real is Real*

I accept this not simple <!--EZCODE ITALIC START-->_ Dynamo_<!--EZCODE ITALIC END--> and I accept that the answer is not absolute, certainly in the short term.

Take Real Estate.  Now if a currency completely bombed out, presumably the bricks and mortar would still be worth something.  I accept that the Real Estate would probably fall in, say, its gold value in these circumstance but that would be because the syndrome which led to the currency collapse (e.g. economic meltdown) would also lead to the fall in the value of Real Estate - but I suggest it is an illusion to say that there was a currency risk involved per se just because the gold value of the currency and the Real Estate happen to be both highly correlated to economic performance.  

Let's tease out this scenario further.  Imagine the collapsed economy to be Spain.  Pre Euro that would mean a bomb out of the Peseta and of Spanish Property in say dollar terms.  In Euroland, the currency would be stable but the Property would bomb out anyway, now both in Euro and Dollar terms.

Turning to Nestle - it consists of machines and people and infrastructure etc.  all real things with real values.  Undoubtedly, Nestle's share price will appear correlated with the Swiss Franc but that is because they are both correlated to the efficiency of the Swiss Economy.  This is a risk which is only very slightly reduced by Switzerland joining the Euro.

Equities are real assets dependent on the health of the real economy.  A currency is merely a unit of accounting and transacting within that economy but as such the "value" of a currency when exchanged to other currencies is also highly correlated to the health of the underlying economy.  But changes in the exchange rate of a currency are not a primary cause but an effect of underlying economic performance just as changes in equity vales would be an effect of economic performance.  This creates the illusion that there is a substantive correlation between the equites and the currency rather than a mere statistical one. :hat


----------



## funny that (18 Apr 2003)

*ssia*

my gross amount investd with ql is 1078 closing balance 938 euros. eh should I WORRY i have another 2.9 ssia to go.


----------



## ClubMan (18 Apr 2003)

*Re: ssia*

The issue of whether to stick with equities or transfer, in full or just future contributions, to something "safer" like deposits or bond/cash funds is one that keeps cropping up. Have a read of the  and in particular  for some more background.

I presume you meant that you have 2.9 years to go on your SSIA until maturity?


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## auburn (3 May 2003)

*How the 1% charge by Quinn Life works?*

Let's take a look at Quinn Life's Eurostoxx 50 Index Tracker.

They say EXACTLY how the 1% charge bit works!

In January, I invest €400 into the fund on a day the unit price stands at €2.50 per unit. With no charge, I would be entitled to €400/€2.50 = 160 units. But Quinn Life place a daily charge equal to 1% of the unit price. This means that I will need to pay (€2.50 + €0.025) = €2.525 per unit. That's right, now I am only entitled to 158.416 units (€400/€2.525) for my €400.

In February, I again invest another €400 into the fund on a day the unit price stands at let's say, €3.50 per unit. With no charge, I would be entitled to €400/€3.50 = 114.286 units. But Quinn Life's daily charge of 1% of the unit price means that I will need to pay (€3.50 + €0.035) = €3.535 per unit. That's right, now I am only entitled to 113.154 units (€400/€3.535) for my €400.

In March, I again invest another €400 into the fund on a day the unit price stands at let's say, €4.10 per unit........and so on. You get the picture! 

Now, instead of putting in regular payments of €400 per month over the 12 months of the year, I could decide to put in €4800 (€400X12) as a once-off lump sum payment at the start of the year (or indeed on any one particular day of the year that takes your fancy). For example, let's say I put in my €4800 into the Quinn Life fund on March 12th - a day where the unit price stands at say €2.90 per unit. With no charge, I would be entitled to €4800/€2.90 = 1655.172 units. But Quinn Life's daily charge of 1% of the unit price means that I will need to pay (€2.90 + €0.029) = €2.929 per unit. That means I am only entitled to 1638.785 units (€4800/€2.929) for my €4800.

I feel that it is very important to know EXACTLY how a fund imposes a charge on you. So when Quinn Life say they impose a 1% daily charge on the unit price, this is what I believe they mean. In other words, you get charged ONLY ON THE DAY OR DAYS THAT YOU DECIDE TO PUT MONEY INTO THE FUND as described above.

If the above is incorrect, please let me know!!

Thanks,
Auburn.


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## ClubMan (3 May 2003)

*Re: How Real is Real*

I don't think that is correct. Your description of the 1% charge is how things would work if it was a 1% bid-offer spread rather than an annual management charge. My understanding is that the 1% charge in this case is actually an annual management charge which is calculated on the full value of the fund. By "daily application" perhaps they mean that they calculate the 1% each day and then average it out over the year or whatever as opposed to, say, simply taking 1% on December 31st or the anniversary of the original investment? Maybe somebody else can clarify?


----------



## auburn (3 May 2003)

*Quinn Life's 1% charge*

Hi Clubman.

You're right! I have just described a bid/offer spread scenario! And Quinn Life state emphatically that they don't impose this type of charge.

Now, that takes me back to square one.

When Quinn Life say that they impose a 1% ANNUAL MANAGEMENT CHARGE and that this charge is exercised DAILY on the UNIT PRICE, then please, someone, tell me how this works EXACTLY! Let me see someone doing a little sum!

Auburn.


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## Dogbert (3 May 2003)

*Management Charge*

Hi Auburn,

They charge 1% per annum spread over the year. Let's assume 250 business days in the year (markets open, funds priced, etc). Therefore they charge (1/250) per day, or 0.004 of a percent.


----------



## ClubMan (3 May 2003)

*Re: How the 1% charge by Quinn Life works?*

Is that definitely it so?


----------



## auburn (4 May 2003)

*1% charge*

Hi Dogbert,

While you may be right, I'm not convinced. I strongly suspect that their charging structure works more like the following:

Quinn-Life tot up the total value of their fund on the close of business EACH DAY. They then calculate 1% of this total value and take it from the fund, putting it aside as PROFIT (meaning, of course, that the value of the fund available at the opening of business the following morning is reduced by the amount deducted as PROFIT the previous evening). 

Once Quinn-Life siphon off their 1% EACH DAY, they then divide the reduced fund's value by the number of units in the fund and this figure becomes the new unit price (i.e. the unit price they work with when new investors want to but in, or old ones want to sell out). Mind you, I suspect that the fund's unit price quoted in the daily papers are the gross values (i.e. the price of each unit before Quinn-Life have scooped off their bit of PROFIT).

Anyway, the point is that I believe a FULL 1% is deducted from the fund's value at the close of business EACH AND EVERY WORKING DAY.

I certainly don't mean to labour the point but we have a couple of conflicting views here about charging already. Doesn't it seem absurd though to think that we are prepared to put large amounts of our hard earned cash into a fund and not really be ABSOLUTELY CLEAR in our heads as to how the fund company will charge us for their efforts in managing it?

Auburn.


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## Dogbert (4 May 2003)

*Management Charge*

Hi Auburn,

Nope, I don't think there's any possibility they're doing what you suggest. Practical proof ? Well, it's a bit late at night for me for any advanced maths, but in markets which have fallen 30% (as they have), there'd be virtually nothing left if Quinn were siphoning off 1% per day as well. But in fact their funds are down pretty much in line with the markets they track.

If they are doing as you suggest, then it's no wonder Sean Quinn was so keen to enter the unit fund market, and amazing that he hasn't launched a PRSA yet. Seriously, investment managers operate the way I outlined, and I'm sure (though I don't know for a fact) Quinn Life do too. Their funds may be examined by their auditors ... why don't you call and ask them for chapter and verse on this, including any external validation, if that's what it'll take to satisfy you.


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## rainyday (4 May 2003)

*Re: Management Charge*



> Once Quinn-Life siphon off their 1% EACH DAY



This is rubbish - You're telling us that QL take an annual (1%) fee every day - There would be nothing left in the fund at all at the end of the year.

A quick spreadsheet calculation shows me that €100 in the fund would be reduced to €8 approx at the end of a 250 working day year, if they deducted 1% each day. Their actual results are nowhere near this.

Auburn - Are you involved in the financial industry?


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## auburn (4 May 2003)

*1% charge*

Hi,

No. I'm not involved in the financial services industry. I'm just curious about the charging bit.

Maybe what I am suggsting is ludicrous, but it seems to me when I do my maths that 1% per day averages out at 1% per annum!

Let's take 5 working days, Monday to Friday, and we'll make up some numbers.

At the close of business on Monday, the value of the fund is €1000. Quinn takes 1%, which amounts to €10. At the close of business on Tuesday, the value of the fund is €800. Quinn takes 1%, which amounts to €8. At the close of business on Wednesday, the value of the fund is €70. Quinn takes 1%, which amounts to €0.70. At the close of business on Thursday, the value of the fund is €500. Quinn takes 1%, which amounts to €5. Finally, at the close of business on Friday, the value of the fund is €1480. Quinn take their 1%, which amounts to €14.80.

The figures I'm putting on the value of the fund each day doesn't matter. 

The point is this. 

The daily average take from the fund by Quinn Life over the 5 days is €7.70. The average daily value of the fund over the same period is €770. The average daily take as a percentage of the average daily fund value is (€7.70/€770)X100 = 1%. If we simply extend out this exercise over 250 business days, then we will get the same result: i.e. by Quinn Life taking 1% of the fund's value at the close of business EACH WORKING DAY, their AVERAGE DAILY TAKE (over the 250 days) expressed as a percentage of the AVERAGE DAILY FUND VALUE (over 250 days) will still amount to 1%.

If, as has been suggested, Quinn only take 0.004% (1/250) from the value of the fund at the close of business each working day, then this means that the AVERAGE DAILY TAKE over the 250 days will only amount to 0.004% of the AVERAGE DAILY FUND VALUE. 

To put it another way, it's the same thing as Quinn taking nothing from the fund at all during the year. They just wait until the end of the 250th day, they calculate the AVERAGE DAILY FUND VALUE and then take just 0.004% of it!!

Or maybe I've completely lost the plot.....!!!

Auburn.


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## ClubMan (4 May 2003)

*Re: 1% charge*

What you're describing there seems to be some sort of _rolling average_ approach to calculating the management charge as opposed what you said earlier - i.e. that they take 1% every day.


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## rainyday (4 May 2003)

*Re: Management Charge*



> The daily average take from the fund by Quinn Life over the 5 days is €7.70. The average daily value of the fund over the same period is €770. The average daily take as a percentage of the average daily fund value is (€7.70/€770)X100 = 1%.



This is mathematically correct, but it's totally irrelevant. Of course, if you take off 1% each day and look at the averages over 5 days or 250 days, then it still looks like 1%.

But you really need to look at the cumulative value of the fees taken, not the average. In your daily model, the fee taken is real cash taken out of the fund each day, so you need to take the cumulative value. 

But you can't take the cumulative value of the fund each day, because it's the same money each day. 

So the relevant calculation with your 5-day example, is the cumulative charges for the week (€38.50), as a percentage of the average fund value €770, which shows that a total of 5% of the value of the fund has dissappeared in fees in the week. If you do this over a year, you'll see that your model would take a total 92% of the value of the fund over the year. It just doesn't work that way. 

You could possibly take the cumulative charges for the week (€38.50), as a percentage of the final fund value €1480, which would give you a total 3%. But this is really due to the wide, unrealistic variations in the fund value over the week. In reality, the two figures would be quite close, regardless of whether you use the average value or the final value.

By the way, why did you single out Quinn Life on this inquiry into fees - Surely you'd have the same concerns about any administration fees for any fund management company?


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## Blondie (4 May 2003)

*Management Charges*

Sorry, Auburn, but you really are missing the plot.  Quinn's management charge is 1% *per annum* taken *daily*.  This is ever so slightly less than 1% per annum taken once a year.

Let's take an example.  Imagine there are 1 million units at the start of the year and that there are no unit transactions during the year.  Then 1% p.a. taken once during the year would give the company 10,000 units worth of value.  Note that this is true whether the deduction is made at the beginning, end or any other time during the year - this is not about the time value of money.

Now 1% p.a. taken daily is 1/365% every day for 365 days and would yield the company 9,950 units worth of value - 50 units or 1/2% (of 1%) less than taking the charge once a year.  

Reason is that as each daily management charge is levied the amount that is left to take the next daily management charge is ever so slightly reduced.

The reason companies take (or accrue) the charge daily is to prevent situations where policyholders would perceive it as worth while to time their transactions.  Thus is if was take out once a year - policyholders would cash in the day before the charge is taken and reinvest the day after.


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## auburn (5 May 2003)

*You're absolutely right!*

Hi,

You're absolutely right! I certainly have been missing the plot completely! I feel a bit foolish!

The last few comments make perfect sense to me now. 

With full clarity on the charging structure, I can sleep easy in my bed tonight!

Thanks Dogbert, Rainyday, Clubman & Blondie for your help.

Auburn.


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