OEE Scientific Committee Meeting, March 17, 2016: Minutes of the Meeting

Transcription

1 OEE Scientific Committee Meeting, March 17, 2016: Minutes of the Meeting Committee members present at the meeting: Scientific Committee Chairman: Christian GOLLIER, OEE, Toulouse School of Economics Marie Brière Philippe Haudeville Fabrice Pansard Christian König Anne Fily Laurent Quignon Alain Tourdjman Auguste Mpacko Priso Régis Tassius Jean-Baptiste de Cabanes Michael Haliassos Henri Delessy Patrick Roger André Masson Guy Laloum Ludovic Djebali Anne Lavigne Amundi Asset Management AF2I Artenia Consulting Association of Private Bausparkassen BEUC BNP Paribas BPCE BPCE Confédération Nationale du Crédit Mutuel Cornet Vincent Segurel Goethe University Frankfurt La Banque Postale LARGE Research Center Paris-Jourdan Sciences Economiques Société Générale Source Université d Orléans Additional participants: Didier Davydoff, Director, OEE Laetitia Gabaut, Economist, OEE Lia Rivet de Sabatier, Support, OEE 15, rue Martel Paris - France Telephone: Site web:

2 1. Projects selected in 2015 Residential Real Estate Investment, Philippe Bertrand (University of Aix-Marseille) and Jean-Luc Prigent (University of Cergy-Pontoise) The authors sent an interim report including available statistics that were used to estimate the efficient portfolio. They pointed out most institutional investor s portfolios are underweighted in real estate. However, Christian Gollier mentioned that catastrophic events are very rare and thus it is difficult to have historical data Even if the probability of a catastrophic event is small, it should be taken into account. All participants agreed that the asset allocation of institutional investors should not be the only framework of analyses. It should also include a detailed analysis of individual investments in real estate that takes into account taxation effects in different countries. It would be interesting to know the optimal time to invest in real estate for households. Real estate often takes up a large share of household assets. It would be interesting to know what percentage of assets is in real estate. An expansion of the document would be useful. Michael Haliassos pointed out risks that owners may face. Tax aspects, in addition to prices, should be taken into account when researching this topic. What is the optimal taxation? What are the advantages of real estate compared to other asset classes? Should real estate be taxed? And what should happen to this tax during a crisis? New collective arrangements for pension risk sharing, Bas Werker (Tilburg University) and Marie Brière (Paris-Dauphine) Marie Brière joined the conference by telephone. She explained the study s objective: In hybrid pension schemes, what is the most efficient way to share risks between employers and employees? The study focuses on the longevity risk sharing and solutions to mitigate that risk; to a third party (i.e. an insurance company) or to share the risk between all participants. The study compares both solutions from the point of view of individuals. Didier Davydoff mentioned that the progress of the research was discussed with a group of OEE members. The importance of fund governance on how risk should be shared between current employees and current retirees was an important parameter. According to Patrick Roger, the solution to mitigate risks between all participants looks very similar to a PAYG system. Christian Gollier brought up interval sharing and asked if longevity shocks are taken into account in the model. What happens if life expectancy increases by 5 or 10 years? Has this been anticipated or have they taken a wait-and-see strategy? 2

3 Marie Brière answered that the model includes increases in live expectancy each year. However, it does not include unexpected shocks on life expectancy, which do occur every year. A first version of the paper will be available in early summer A conference on this paper is planned for autumn. 2. Studies completed since the last Scientific Committee The 2015 edition of the Overview of institutional asset management for the AF2I Didier Davydoff stated that Prometeia does the same analysis in Italy. The OEE and Prometeia are discussing some evolutions of this work. A pan-european analysis could be done that includes four countries (Italy, France, Germany and the United Kingdom). Partners in Germany and the UK need to be found. Patrick Roger would be interested in the distribution of micro- and macro- investments. Christian Gollier wondered if macroeconomic effects have an impact on the asset allocation of institutional investors when compared to their intentions mentioned in the survey. Philippe Haudeville answered that changes take time and are very slow after macroeconomic events, such as the boss changing. However, changes are coherent in the 3 families of investors (insurers, pension funds, sovereign funds). IODS delivered a study to the BEUC on the market for savings accounts in Europe. Anne Fily summarized the objective of this project, which measures the potential benefits savers could have, by chasing advantageous interest rates across Europe, for example. She outlined existing obstacles, such as certain savings accounts being available only to residents and tax regimes. We are currently experiencing a low interest period, meaning there are big differences between countries. 3. Progress of OEE s on-going research projects Project on financial guidance Anne Fily then referred to a study the OEE is currently working on for FISMA, the European Union s Financial Stability, Financial Services and Capital Markets Union service, looking into independent generic financial advice. This involves an overview of the financial situation of households and the possible incentives that could encourage them to seek financial advice, such as taxation. The objective of the project is to identify the best practices in financial guidance, its costs and the kind of organizations able to undertake this service (public body, non-profit organization ). Michael Haliassos responded that people who usually receive financial advice from commercial entities are those who have money. However, the fees that they could charge the 3

4 middle class would not be sufficient. A certain level of financial literacy is also necessary so a lot of people are not even aware they need help. In response, Anne Fily said that other providers could help, such as consumer groups. Jean-Baptiste de Cabanes expressed concerns with regards to whether the objective of the project was to remain country-specific or if it will consist in finding best practices for all countries. Anne Fily replied that people need advice everywhere and that the purposes are the same in all countries (retirement, saving for buying a dwelling, financing children s studies etc.). Jean-Baptiste de Cabanes added that while the purposes may be the same, legal frameworks across Europe are very different from one country to another and have to be considered. Didier Davydoff added that the way this advice is dealt with across countries is very different; in the UK, it is a government-run group (Money Advice), in the Netherlands and Germany it is often run by non-profit organizations and in France there is a focus on people in financial difficulty. 4. Call for tenders in 2016 Prior to the meeting, several propositions were received and then discussed during the meeting: Isabelle Laudier s propositions - The consequences of a zero interest-rate economy, including savings, but also for asset managers. - An additional subject, that unfortunately comes up often, concerns the types of incentives that encourage households to save longer term and increasingly towards products whose objective is to finance investments. Eric Jondeau s propositions - The situation of the real estate market in the world and particularly in Europe is a topic of interest. This is one of the few asset classes where expectations of positive returns remain. Furthermore, these markets remain national in their operation, making international comparisons difficult. Added to this is a strong lack of data (including comparable data). - A second topic that is also of interest concerns the current situation of hedge funds and, notably, the lack of confidence many investors have for these funds (lack of transparency, significant delays to recover their investment). Again, this is one of the few asset classes for which we expect positive earnings. In recent years, hedge fund replicators have been developed, but no studies have been done on these types of funds. 4

5 Patrick Roger s proposition Patrick Roger explained that there exists a huge heterogeneity and rigidity in MIFID questionnaires. As a result, it is difficult to measure client risk and loss aversion in addition to their expectation of preferences. When looking at the same questionnaire in two different languages (French and Flemish, for example), there are differences in word perception. Are there cultural, language or education effects? People who design questionnaires have their own opinion and risk conception. The conception of risk can be different from client risk aversion. Consequently, can a bank trust the outcome of a questionnaire? There are a lot of framing effects. Didier Davydoff added that there are also compliance issues as banks can be limited in what they can offer clients following responses made to a questionnaire. Ludovic Djebali wondered if it was good timing to launch this project as MIFID 2 will be implemented in It will include new rules and a new framework. According to Michael Haliassos, the timing might be good as the main objective of this project is to measure risk aversion, the assessment of risk in general and try to examine preferences for safety. According to André Masson, the willingness to take risk depends on stock price expectations. When expectations are down, the willingness to take risk decreases. People take less risk even when their preferences are almost unchanged. The French are more prudent in their preferences and the young are more risk averse. Framing effects disappear when the number of questions in the MIFID questionnaire increases. Michael Haliassos propositions Michael Haliassos proposed two different topics: 1. Studies on the Capital Markets Union could be interesting. There are a lot of possibilities to extend and promote research on savings accounts in Europe. 2. Promote research on a single European market, especially a single labor market. How people can move from one country to another. It implies many issues: insurance, savings and pension products issues. Currently, people can move around but it is not very smooth. Christian König added that there are problems concerning credit markets across European countries. It is difficult to obtain credit when you don t have a bank account history in the country of residence. André Masson suggested extending this to social protection. Ludovic Djebali s proposition Ludovic Djebali indicated that the ETF industry has become extremely important, with 300 bn currently under management. The industry has overtaken the hedge fund industry. Previously, it was a market dedicated to pure institutional investors. Following the Retail Distribution Review, the UK banned retrocession. It changed the landscape of investors who have access to new tools (such as platforms, robot advisors) at a lower price. Retail investors 5

6 have access to this market and they only pay for the advice. In Europe, there exists a lag of 10 years in the regulation of this sector in comparison to the US. No rules exist at a European level. This is going to change. A research program can focus on the following elements: o How will the ETF market be impacted by on-going change in the financial world in Europe? o Create an ETF dashboard to measure market activity analyzing new distribution models. o How does regulation and new distribution models affect investor access to products? Henri Delessy s proposition Henri Delessy explained that digitalization is becoming more and more important in financial markets. A research program could focus on the following issues: o How does digitalization change the distribution of products? o What are the new technologies and developments used by all market participants? Who are the new participants (robot advisors, Fintech ) and what are their roles? What will the impact be on financial regulation? o How does the digitalization of the financial industry affect saver s behavior? Finally, André Masson expressed an interest in age effects and preferences with regards to risk aversion. Risk aversion is increasing following the aging of recession babies, who are now members of young households and are very averse to risk. At the end of the meeting, it was decided to select three themes of research for the OEE s call for tenders in 2016: 1) The measurement of risk aversion and preferences towards risks in the framework of European regulation (based on responses of MIFID questionnaires). 2) Household savings behavior in the framework of the Capital Market Union. 3) New distribution channels of savings products (including ETFs and taking into account digitalization effects). A detailed call for tenders will be drafted in April. 6