The use of scenario-based modelling

The challenge of client-focused investment is coming into starker focus as packaged investment solutions such as model portfolios and target date funds are becoming increasingly popular

The fact an investor's cashflow requirement or liability forms the basis for any investment strategy is often overlooked or misunderstood. For a defined benefit pension fund, this cashflow is usually a stream of salary-linked pension payments to retired ex-employees. An insurance company operating with-profits business may need to make a series of guaranteed payments to policyholders at specified dates. A 60-year-old retail investor may use their accumulated fund to generate an annual income of 5% of initial capital over a retirement period of 20 years. A 30-year old might regard their i...