13
Irish Pensions Magazine Spring 2015
Advertorial
Analysis
6% income (rising with inflation)
Po r t f o l i o
Volatility
Years that
income is
sustained*
Equity
Risk
4/5
ths
of
Equity
Risk
3/5
ths
of
Equity
Risk
2/5
ths
of
Equity
Risk
18.0% 14.4% 10.8% 7.2%
14.3
17.6
22.6
28.4
* with 90% probability
Our research shows that evenmodest volatility control
(a 20% reduction) improves the likely sustainability of
income by 3.3 years, i.e. 23% longer by comparison
with plain equity investing.
The GARS Fund from Standard Life Investments is
expected to have between 1/3 and 1/2 the risk of
Global Equities. Even allowing for real-world fee
differentials and for GARS at the upper end of its
expected risk range, we calculate it could sustain the
6% income for 21.7 years (at the 90% percentile) i.e.
7.4 years (or over 50%) longer.
1
GARS targets Cash +5% per annum, gross of fees,
over a rolling 3-year period. Where Cash is evaluated
in line with European inter-bank 6 month lending rates.
2
GARS volatility will ordinarily be between 4% and 8%,
or 1/3 and 1/2 the risk of equities more generally
Article Author
Liam Stack
Investment Director
Standard Life Investments
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