"Flexicure" Retirement Solutions: A Part of the Answer to the Pensions Crisis? - EDHEC-Risk Institute research article in the Journal of Portfolio Management

Written on 01 July 2019.


We are pleased to enclose an EDHEC-Risk Institute research article published in the July 2019 issue of the Journal of Portfolio Management. Individuals should not have to choose between security and flexibility when approaching retirement investment decisions. In this article, authors Lionel Martellini, Vincent Milhau and John Mulvey propose to apply the principle of goal-based investing to the design of a new generation of flexicure retirement investment strategies, which aim at offering the best of both worlds between insurance products and asset management products.

Individuals preparing for retirement are currently left with an unsatisfactory choice between security with no flexibility with annuity products, and flexibility without security with investment products such as balance funds or target date funds. To get out of this impasse, the authors introduce a range of flexicure retirement goal-based investing strategies that offer both security and flexibility with respect to the objective of generating replacement income in decumulation. Recent advances in financial engineering and digital technologies make it possible to apply goal-based investing principles to a much broader population of investors than the few traditional clients who can afford cutomized mandates of private banking services, which suggests that these flexicure retirement solutions can be use as part of the solution to the global pension crisis.

You can access here the paper "Flexicure" Retirement Solutions: A Part of the Answer to the Pensions Crisis?"

 

Lionel Martellini is a Professor of Finance at EDHEC Business School and the Director of EDHEC-Risk Institute. He is a former member of the faculty at the Marshall School of Business, University of Southern California, and has been a visiting fellow at the Operations Research and Financial Engineering department at Princeton University. Professor Martellini conducts research in a broad range of topics related to investment solutions for individual and institutional investors, equity and fixed-income portfolio construction, risk management and derivatives valuation. His work has been published in leading academic and practitioner journals and has been featured in major European and global dailies such as The Economist, The Financial Times and The Wall Street Journal. Professor Martellini has served as a consultant for large institutional investors, investments banks and asset management firms on a number of questions related to risk and asset allocation decisions, and is a regular speaker in seminars and conferences on these subjects..

 

Vincent Milhau, PhD, is the Research Director at EDHEC-Risk Institute, where he is currently responsible for overseeing projects related to goal-based investing and investment solutions, with a particular focus on retirement investing. He joined the organisation in 2006 and has worked on a number of asset allocation projects for institutional and individual investors. These have included asset-liability management for defined-benefit pension funds, life-cycle investing, target date funds and goal-based investing for individuals, long-term investing under short-term constraints and factor strategies. He has also contributed to the Institute’s research on portfolio construction in the equity and the fixed-income universes. He has co-authored articles that have appeared in international finance journals. Dr. Milhau earned a master’s degree in statistics and economics from the ENSAE, Paris, and a PhD in business studies from the University of Nice-Sophia Antipolis.

 

John M. Mulvey is a Professor in the Operations Research and Financial Engineering Department and a founding member of the Bendheim Centre for Finance at Princeton University. His specialty is financial optimisation and advanced portfolio theory. For over thirty-five years, he has implemented asset-liability management systems for numerous organisations, including PIMCO, Towers Perrin/Tillinghast, AXA, Siemens, Munich Re-Insurance, and Renaissance Re-Insurance. His current research addresses regime identification and factor approaches for longterm investors, including family offices, and pension plans, with an emphasis on optimising performance and protecting investor wealth (and surplus wealth). He has published over 150 articles and edited 5 books. He is developing a Massive Online Open Course (MOOC) with Professor Martellini - “Python Machine Learning for Investment Management,” and is a senior advisor for Alibaba (Ant Financial) and First Republic Bank.

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