24th Jul '15


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The main reason why you might consider a barrel in the ground to be worth $20 when a bbl in your hand earns you $45 is not doubt over whether it will ultimately emerge from the bush. Rather it's that it's going to take the typical bbl, say, 7 years to turn up and you consider $45 in 7 years time to only be worth…

The discount rate certainly isn't a risk free rate. I think it's their anticipated rate of return on their portfolio (whose composition is also given). In fact over the last year their investment returns were £78m ahead of the discount rate. But that good investment performance has been wiped out by their assumptions becoming more pessimistic.

Re the Trinity pension deficit, note 12 sets things out in quite some detail. Far from starting to improve, the actuarial assumptions have continued to deteriorate. The discount rate has increased slightly but the inflation expectations by considerably more, so over the last 6 months the real (wrt RPI) discount rate has shrunk from 1.7% to 1.25%. According to the sensitivity information given, the deficit…

Prof Wurler wants $5 to read his paper, so I won't be addressing his views. I don't think there's anything destabilising about passive investing per se, and furthermore I think it's arguable that passive investors DO pay a 'tax' to good active investors. Firstly I'll point out that index investing is not completely passive - it starts off with an active decision about which index…

Doesn't that note 3 solve much of the problem? If a 0.5% change in the discount rate will alter the value of the discounted asset by $2.1m = 5% of 40.6m then the payout's expected in about 10 years time. Well the cash flows will have a 'centre of gravity' about 10 years out. Having estimated the duration, it appears they're using a discount rate…

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