Total return approach

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LTD

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Is it ok for DB pension plans?
For life insurance?
 
it is definitely ok. The only situation I see where a total return approach would not work is a private investor who want to cash on the income provided by the portfolio while protecting the real value of capital, there a total return approach would not be ideal
 
What if it is underfunded? Only income approch should be applied?
 
no, still the total return approach. from what I have studied the only time we should think about non total return approach would be for individuals either because of their preferences or because of tax constraints.
 
I still have not seen any examples that have suggested using any approach other than total return. Obviously, consider the tax situation of dividends/interest vs. cap. gains, but if the investor’s portfolio is liquid, it is assumed that it can be rebalanced to meet income/liquidity needs.
 
Someone remind me about the total return approach and the relative approach.
 
total return has no link to the relative approach, it is absolute approach vs relative and total return vs income/capital return only
 
By absolute vs. relative you’re referring to asset-only vs. liability relative, right?
 
no, absolute return target would be a number eg at least 5% per annum, while a relative one would be relative to a benchmark eg S&P500+100bps.
 
So total return is compared to income return, and capital return. And that’s not on the same scale as absolute and relative return which is a return target.
 
yes for me it is different chapters in fact. speaking about absolute and relative return put you in the benchmark study session while speaking about total return vs income/capital return is more of a Individual PM study session
 
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