An investment decision can be no better than the view of the future it is based on. Insight is here to make sure it’s a good one. It provides a full picture of investment prospects in a format that is easy to apply, even to complex situations, and the tools to display the outcomes from any angle. With the right information available at the right time, financial decisions can be better, faster, balanced (appropriate weight given to competing influences) and built on a strong foundation of understanding.
Insight was designed from the start to apply institutional strength modelling to the requirements of private investors. Those requirements include saving for pensions, managing income withdrawal and balancing multiple goals.
That means making very long term projections, understanding dividend and interest income, capturing the important properties of the investments used and addressing uncertainty not just in final outcome but on the way there. The requirements are simple but solutions are much harder to find than they should be forcing many investors to rely on what nuggets they can sift from a stream of over extended models and stale averages and having to overcome actually misleading assumptions about key investments. It was, however, much easier to identify the shortcomings of existing arrangements than to solve them.
Building a successful solution required a large investment of time and resources and stretched the boundaries of what could be done with computers and financial modelling but now we have a model that is:
It is robust and sensitive enough that we use it for managing dynamic asset allocations for model portfolios and mutual funds.
Insight is delivered as a set of scenarios each of which presents a coherent and realistic path for all of the asset prices, income flows, interest, inflation and exchange rates modelled. This makes it straightforward to work out what could happen to an investment plan, not just at the end but along the way. This is very useful for considering questions arising from lifetime cash flow modelling. Sequencing risk (e.g. a run of poor returns) is also taken account of which is particularly important for retirees drawing down from their wealth to provide an income.
Together, Insight scenarios show the range and average outcome that history, market conditions and careful modelling lead us to expect.
This approach models investments and plans directly allowing them to be assessed and summarised as appropriate in contrast to approaches that jump directly to a volatility statistic or expected return. It also allows us to reflect properties of investments that are well known like fat tails, skews and complicated dependence structures that can be awkward to capture in more abstract models.
The diagram below displays how Cash is very predictable in the short run but can deliver surprises in the long run.
The diagram below displays how Bond returns (as at 30 March 2018) can be unpredictable in the short run but relatively predictable if skewed in the longer term.
The diagram below displays how Equity returns (as at 30 March 2018) show very wide dispersion of returns in the short term
1Accessing our APIs where the Insight simulation data is used for the projections.
This enables our clients to access the wide range of calculations, projections and graphs available whilst controlling the user interface. See our APIs here
2Deploying our existing solutions where the underlying APIs are provided with a user interface layer.
This includes our suite of investment and retirement solutions including the market leading Pension Freedom Planner.
3Using the underlying simulation data as a basis for the projection of products and funds.
This includes the stress testing and value for money testing of products or funds against other benchmark offerings.
4Building custom APIs or user interface layers.
EValue has long experience and deep actuarial expertise in applying our asset modelling to investment and advice situations. EValue can create custom APIs and solutions for our clients, powered by the simulation data from Insight.