Category Archives: Financial risk management

Helping Australians make effective savings decisions today for a better retirement future

Superannuation is one of the most valuable products working Australians own. Yet it’s one of the products they care least about.

Forcing people to buy a product when the value can’t be unlocked for many years is not a good starting point for engagement. Attempting to persuade members to save more super by using broad-based one-size-fits-all targets has failed.

But research suggests that when members are able to see their future selves in vivid and realistic detail, they are more willing to make choices today that may benefit them in the future. Super funds can play a role in connecting the two.

In this article, Milliman’s Jeff Gebler says that the super industry’s dominant comfortable retirement savings target is not indicative of who its members are or who they will become. He says that funds can help members see themselves in meaningful, positive terms, thus sparking genuine engagement and better long-term decisions.

Milliman FRM Market Commentary: April 2018

Stocks settle in as interest rate questions loom. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• After two consecutive months of market tumult (comparatively speaking) and negative returns, the S&P 500 in April exhibited greater calm and eked out a positive return.
• Volatility was lower in April than it was in March and closer to its five-year average across each of the major segments of the global equity market.
• Unlike 2017, markets in post-January 2018 have been much less decisive. On the one hand, strong global economic growth and pro-growth tax cuts are reasons for optimism. On the other, trade-tariff wars and rising interest rates are undermining investor confidence about potential future earnings growth.
• The U.S. dollar broke upward out of its three-month range, creating a headwind and potentially higher volatility for non-U.S. equities.
• Correlations between major equity market segments were little changed in April. The correlation between U.S. stocks and bonds, however, edged higher as rising interest rates and widening credit spreads weighed on bond market returns.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: March 2018

March validated February’s initiation of a new, higher volatility regime. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• March capped off the S&P 500’s first negative quarterly return since Q3 2015 and the first negative Q1 since 2009.
• After not experiencing a single daily move of more than 2% through all of 2017, the S&P 500 has now seen six such moves through February and March.
• If “taper tantrum” was a fitting moniker for the 2013 reaction to the prospect of ending the U.S. Federal Reserve’s quantitative easing (QE), the volatility in early 2018 might well be referred to as the “tightening, tech, trade-tariff tantrum,” as markets reacted to tighter monetary policy, a data breach at Facebook, and the prospect of a tariff-induced trade war.
• While not as high as it was in February, volatility in March was still above its five-year average and much higher than it was in 2017.
• Falling interest rates boosted the U.S. aggregate bond market, reducing its correlation to equities and improving it as a diversifier, while the correlation between U.S. and foreign equities increased.

To learn more, download the full commentary at MRIC.com.

Milliman FRM Market Commentary: February 2018

Volatility awakened in February after a two-year hibernation. In this month’s commentary, Milliman’s Joe Becker addresses the following:

• After 15 consecutive months of positive returns, the global equity market posted its first negative monthly return since October 2016 and its highest monthly volatility since June 2016.
• Up more than 7% year-to-date into late January, the global equity market quickly changed direction and sold off more than 9% in less than two weeks.
• February saw 12 daily moves in the S&P 500 of at least 1%, already 50% more than 2017’s total of eight. In addition to higher realized volatility, the VIX spiked to its highest level since August 2015.
• The start of February’s downturn coincided with two economic data surprises. Larger-than-expected growth in both payrolls and average hourly earnings triggered fears that the Federal Reserve would begin to tighten policy at a faster rate than previously expected.
• As is often the case in times of market stress, February’s downturn saw correlations across market segments and asset classes push higher.

To learn more, download the full commentary at MRIC.com.

Surprising new research reveals the majority of Australian retirees spend less than the Government Age Pension

More than half of Australian retirees are spending less than the Age Pension each year, raising significant questions about current retirement policy and super fund strategies, according to new research. The research suggests mandatory and voluntary measures to boost super funds may not be enough to produce improved retirement lifestyles without a deeper understanding of the motivations driving retiree behaviour. Milliman’s Jeff Gebler offers perspective in this article.

Milliman FRM Market Commentary: January 2018

Without missing a beat, global equities continued their rally into 2018. In this month’s commentary, Milliman’s Joe Becker, Adam Schenck, and Jeff Greco address the following:

• After rising 1.5% in December and finishing the year 24% higher, the global equity market roared out of the gate in January, climbing 5.5% and notching its best start to a new year since 1994.
• Emerging market equities led the way, rising nearly 10% before finishing the month up 8.2%. That brings its 12-month return to 41.3%, its best since April 2010.
• With the exception of emerging market equities, volatility edged slightly higher around the globe in January, but remained in a historically low range. The VIX reached its highest level since August.
• In the United States, consumer discretionary stocks led all sectors, rising 9.2% on the month, while interest-rate-sensitive utilities lagged as the majority of the yield curve pushed sharply higher.
• The Federal Reserve left its interest rate unchanged at its January 31 meeting, but noted that, “Inflation on a 12-month basis is expected to move up this year and to stabilize around the committee’s 2 percent objective over the medium term.”

To learn more, download the full commentary at MRIC.com.