During a holiday earlier this year a friend of mine complained that since she started to contribute to her companay’s pension scheme, which is made up of primarily long-only equity investments, the value of the fund had gone down significantly.
The view that a traditional portfolio of investments made up of equities and bonds will eventually create absolute returns net of fees in the long-term has gone out of the window since the global financial crisis especially now the FTSE, the UK index, is about 1000 points lower than it was 10 years ago.
This development is significant. The preceding decade of decadence fueled by debt has gone. Governments are virtually broke and generous company final salary schemes are on the way out – which means that more and more people will have to look after their own investment decisions to fund their retirement years.
Gaining alpha and absolute...