Quinn Life SSIA 1 Year On

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.

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

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!

I'm winning!!

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

I'm winning!!

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

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.

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?

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

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

Re: Active vs Tracking

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

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?

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.

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.

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.

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" ??

Why was Eurostoxx Daft as a Brush?

Coz its bombed out.:rolleyes

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.

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.

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

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" !