Global Derivative Industry and Global Trends in Pension Funds

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Contributed by: Aviral Jain, CFA

Indian Association of Investment Professionals (IAIP), a member society of CFA Institute, had organized a speaker event in Delhi, on the topics of Global Derivative Industry and Global Trends in Pension Funds on July 13, 2014. The speakers at the event were Nitesh Bansal – Global Head, Commodities Research, Futures First; Rahul Chowdhary – ex Trader, current Business Manager, Futures First; and Anil Ghelani, CFA who is Business Head & Chief Investment Officer at DSP BlackRock Pension Fund Managers and is also associated in volunteer capacity as a Director on the Board of IAIP. The event saw a good turnout of more than 70 people; besides many active members, CPs and candidates from Delhi/NCR, this time we had an interesting participation from a candidate who had travelled from Pune to participate for the IAIP event.

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Global Derivative Industry and it’s Participants – Evolution and Road ahead & Your Career

In this case study based session, the speakers from Futures First talked about the role of Hedge Funds and Proprietary Trading in Capital Markets. There were talks about different strategies that are employed in the Financial markets, emphasis on the Regulation and the System Risks – too big to fail theory.  There was also a discussion on the vitality of the Derivatives Industry and the controversies that it entailed.  The speakers then shared case studies with a view on the global financial market from a markets perspective. The co-relation between markets and different asset classes and the subsequent domino effect on the global economy was discussed. They also elucidated evolution process of the derivatives market and the growth of this industry.

In the second part of this session, speakers discussed the career opportunities in the derivative industry. They also gave a view on the work culture at Futures First and discussed the current opportunities available.  

IAIP received excellent feedback from the participants as the session not just gave knowledge and insights into the global derivatives but also helped the participants in understanding the challenges at work and career opportunities in this industry.

Global Trends in Pension Funds – Impact of Increased Longevity

In this session, Anil Ghelani, CFA who is Business Head & Chief Investment Officer at DSP BlackRock Pension Fund Managers gave insights into the world of pension funds.  Broadly following topics were discussed:

  • The event started with a generic discussion on the importance of financial planning for retirement and role of pension funds.
  • Discussion “fiduciary capitalism” and how there is a visible shift in the approach of long term institutional investors globally.
  • Increase in life expectancy resulting in a higher liability for pension funds as beneficiaries live longer than expected.
  • Globally this is resulting in changes to investment allocations and evolution of innovative financial products for risk management.
  • Discussed the emergence of innovative instruments such as “Death Derivatives” to deal with longevity risk.
  • Reviewed the concept of Target Date Funds (TDFs) and its strong growth – the first ever TDF under DC pension schemes was BlackRock’s LifePath in 1991.
  • Another important development globally is the shift from Defined Benefit (DB) to Defined Contribution (DC) plans where on a consolidated basis in the past decade, DC assets have grown at a much faster rate as compared to DB assets.
  • On similar lines even in India we have National Pension System (NPS) as a DC plan which would be an important pillar of retirement planning for individuals.
  • NPS has a unique tax benefit for salaried employees whereby under NPS Corporate Model, employer’s contributions upto 10% of basic salary qualifies for additional tax deduction over and above the usual Rs. 100,000 limit, without any monetary cap.
  • Discussed investment strategies used by portfolio managers for managing NPS investments covering equities, corporate bonds and government bonds.

An interactive Q&A session wrapped up the session of about 2 hours, followed by a vote of thanks by IAIP Volunteer and IRC Committee Chair, Aviral Jain, CFA, thanking the participants for their interactive discussions and the fellow volunteers for their efforts towards IAIP activities.  There was some valuable networking and general discussions during the day.

– AJ

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