XBRL news

Professional Investor has printed a review article about XBRL, written by Mike Willis and myself. Feedback is very welcome!

Furthermore, here is a presentation I used recently. Thanks to XBRL Europe for sharing it!

Dynamic investment strategies [CH]

The recently published study Dynamic Investment Strategies for Swiss Pension Funds by the Swiss Institute of Banking and Finance at my alma mater has caused a bit of a stir in the Swiss media. But naturally, the stir does not come from the study's main tenets - it's far too technical for that - but rather from some marginal comments which hit an environment rife with discontent about pension funds' investment behaviour.

Materially, the study assesses alternatives to the current common practice of buy and hold strategies. There is quite enough material for disagreement not to have to take recourse to marginal political squabbles. My main points of critique are the following:

The expected annual growth rate of the funding ratio is the key variable studied. The model pension fund's liabilities are a key component of this ratio. Yet, the model never revalues the liabilities during the whole simulation period of ten years, despite of changes in the discount rate. Starting from an initial value, the fund's liabilities are simply bearing the technical interest rate. This is not just a model simplification, it is a critical omission. If the model were corrected for that factor, the shapes of the central charts probably have to be modified, which might easily change the conclusions of the study.

Leveraged Constant Proportion Portfolio Insurance (CPPI) is one of the strategies recommended. This strategy implies that the fund uses leverage, probably in the form of a loan. Strategic borrowing is not permissible for pension funds, though.

Another strategy uses long straddles without mentioning that there cannot be net leverage without recourse to art. 59 BVV 2.

P.S. The authors comment offline that they assumed a constant technical interest rate and a closed fund. Unfortunately the assumption about the technical rate was tacit.

BIS on fair value

Great timing! The Bank for International Settlements (BIS) has just published a series of four papers on fair value accounting:

208: Including estimates of the future in today's financial statements

209: Fair value accounting for financial instruments: some implications for bank regulation

210: Institution-specific value

211: Do accounting changes affect the economic behaviour of financial firms?

Why is this great timing, you may wonder? Well, it is very useful material for my upcoming presentation at the World Standard Setters Meeting in London on 26 September.

Pension deficits: up & down

What I wouldn't find myself on Mercer's website, Google did for us: Here is Mercer HR's recent summary report about top UK and European companies' pension exposures and trends as at 30 June. The charts & findings are interesting, but I am not entirely convinced about information consistency, what with this being rather novel concepts for many of the preparers.

IAS 19: new draft interpretation

On 24 August, the International Financial Reporting Interpretations Committee (IFRIC) has released a draft interpretation of IAS 19 for public comment until 31 October. To quote from the IASB's website: The proposals clarify how to determine in normal circumstances the limit on the asset that an employer’s balance sheet may contain in respect of its pension plan as well as how the pensions asset or liability may be affected when there is a statutory or contractual minimum fu nding requirement.

As Swiss pension schemes are subject to statutory minimum funding requirements, this new IFRIC interpretation should come under close scrutiny in Switzerland.