Displaying items by tag: risk

According to the results of a recent survey, fixed-income investors want more ESG data than what is currently available. A survey of 111 senior buy-side fixed-income investors, which was conducted by analytics firm Coalition Greenwich, found that 90% believe ESG is important to decision-making, but only a third have fully integrated ESG into their risk analysis. The reason for the large difference is a lack of ESG data. Coalition Greenwich’s senior analyst Stephen Bruel stated “It boils down to risk management. If you don’t have reliable ESG data about an issuer or issuance, then it’s harder to calculate what the negative consequences might be.” More than half of the respondents said it was “important to incorporate ESG in fixed-income portfolios to perpetuate corporate values,” but there’s a “gap between where the survey participants want the industry to be and where it actually is.” Data was listed as the largest obstacle to achieving these ESG goals. The concerns about ESG data quality included greenwashing and inconsistent ratings. Essentially, if the data isn’t reliable, then quantifying risk becomes harder, which could open up investors to sizeable losses. This is especially true with the calculation of climate risk, which would certainly benefit from more data.

Finsum: Based on the results of a recent survey, fixed-income professionals believe ESG is important, but a lack of data is preventing more of them from implementing an ESG strategy.

A form reviewer at the Securities and Exchange Commission recently said he wants to make sure life insurers give investors a clear picture of how their registered index-linked annuity (RILA) contracts work. RILAs are annuity contracts that can expose the holder to the risk of investment-related loss of principal, but that tie crediting rates at least partly to the performance of investment indexes, rather than to the performance of funds that resemble mutual funds. At the Life Insurance Products Conference, held recently in Washington, D.C., Michael Kosoff, an attorney on the staff of the SEC’s Division of Investment Management, stated that he wants one strategy to be available throughout the life of the contract. He also wants to require issuers to disclose maximum losses. Essentially, the SEC wants life insurance company clients to say which crediting strategy the clients' guarantee will be available for the life of a RILA contract. A crediting strategy includes a reference to a particular index such as the S&P 500. Kosoff’s concern is that many issuers have a provision stating, “After the first year, we can terminate any and all options currently available. So, in essence, after year one, investors have no idea what they’re getting.”

Finsum:Due toconcerns over changing crediting changes in registered index-linked annuities, an SEC form reviewer stated that he wants one strategy to be available throughout the life of the contract.

According to a poll of over 355 financial services IT and business leaders, financial services firms feel more confident that they're protected from cyber risk than firms in any other sector. However, they still face significant third-party cyber risks. Cybersecurity firm Trend Micro Incorporated commissioned Sapio Research to perform the survey. The poll found that 75% of financial firms believe they're adequately protected from ransomware. This is far higher than the average of 63% across all sectors. This confidence is attributed to the actions being performed by cybersecurity professionals. According to the survey, 99% say they regularly patch servers, 92% secure remote desktop protocol (RDP) endpoints, and 94% have rules in place to mitigate risks from email attachments. But 72% of respondents also admitted that their organization had been compromised by ransomware in the past, and 79% see their sector as a more attractive target for cyber-attacks. In fact, Trend Micro found that 56% have had suppliers compromised by ransomware, 54% believe their suppliers make them a more attractive target, and 52% say a significant number of their suppliers are Server Message Blocks (SMBs), who may have less resource to spend on security.

Finsum:While financial services firms are more confident in their cybersecurity protection than other sectors, they often face more threats.

JPMorgan’s Chief Market Strategist Marko Kolanovic is trimming risk exposure in the bank’s model portfolio due to uncertainty in central-bank policy and a rise in geopolitical tensions. It’s a notable move for one of the most bullish strategists this year. Kolanovic cut the size of the company’s equity-overweight allocations and bond-underweight allocations. Equity overweight is the expectation for stocks to outperform their peers, while bond underweight is the outlook for bonds to underperform their peers. In a research note on Monday, Kolanovic’s team wrote, “Recent developments on these fronts — namely, the increasingly hawkish rhetoric from central banks, and escalation of the war in Ukraine — are likely to delay the economic and market recovery.” This follows Kolanovic’s comment earlier this month that the company’s year-end S&P 500 target of 4,800 may not be realized. However, he is hoping that bearish sentiment could limit further declines, while Asian economic growth could help support a global recovery.

Finsum: Uncertainty in the Fed’s central-bank policy and a rise in geopolitical tensions led JPMorgan’s Chief Market Strategist to trim risk in the firm’s model portfolio.

--Are annuities the way to travel, or are you better off whipping out your trusty IPhone and beckoning a Uber?

--Questions…..questions. Okay, so, what are some of the trepidations surrounding annuities? 

--One factor, apparently, is inflexibility. It goes like this: with a fixed or fixed index annuity, your interest rate? Why, for the life of the contract, it’s locked in, according to annuityexpertadvice.com. Meaning? Well, if rates trek north, you’ll derive nothing stemming from a spike in returns. Conversely, if rates falter, you’re good because your investment’s shielded from receding.

--Then there’s the bugaboo of market fluctuations revolving around your investment that enters the equation with a variable annuity. With a drop in the stock market comes a decline in the value of your investment. 

--Meantime, customization also enters the picture. Risks most conceivably linked to annuities can be mitigated by the fact the annuities themselves are, by their nature, custom friendly, according to sophisticatedinvestor.com. A caveat, however: that features comes with the assumption you’re willing to fork out the cash for it.

Then there are annuity riders – provisions you invest in for annuities, the site continued. They rachet down the percentage of your annal annuity payout.

What are the fears of risks about an annuity?

With a fixed or fixed index annuity, your interest rate is locked in for the contract’s life. So if rates go up, you will not benefit from the higher returns. However, if rates go down, your investment is protected from declining.

With a variable annuity, your investment is subject to market fluctuations. If the stock market goes down, your investment value will also go down. ...

Are Annuities Good Or Bad? (2022) - The Annuity Expert

Pro: If You’re Looking for a Guaranteed Income Stream in Retirement, an Annuity Can Help

An annuity can be a good option if you’re looking for a guaranteed income stream in retirement. With an annuity, you make a lump sum payment upfront and then receive payments from the annuity provider for a set period of time, typically for the rest of your life. This can provide peace of mind knowing that you have a guaranteed income stream to cover your basic living expenses in retirement.

Con: Annuities Come with High Fees

One of the most significant drawbacks of annuities is that they come with high fees (typically variable annuities). These fees can eat away your investment returns, leaving you with less money than you started with. So be sure to review the fee structure of any annuity before investing carefully.