‘Retirement Bonds’ could increase income, lower risk: EDHEC

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Retirement Income Journal 16/12/2021

Retirement Income Journal


"(...) Similar to the SeLFIES proposed by Robert Merton and Arun Muralidhar, the Retirement Bonds proposed by Lionel Martellini and Shahyar Safaee of France's EDHEC Risk Institute would guarantee safe income over the first 20 years of retirement. 

One comment in particular caught my ear during an online presentation last week by Lionel Martellini and Shahyar Safaee, the director and research director, respectively, of the EDHEC Risk Institute in France. 

EDHEC, a business school and financial research institute, is probably the most important hotbed of decumulation studies that that you haven’t heard of. 

In his presentation, Safaee clicked to a slide showing a graph with the familiar rainbow of the “efficient frontier” of investing, with which we are all familiar. But on this particular slide the graph showed a double-arc rainbow: one arc composed of orange dots and the other of blue dots.

The chart showed that at any given equity allocation, hypothetical retirees could get more income (on average, over a finite, 20-year window) with less risk if they put the balance of their assets into the “Retirement Bond” (more on that in a moment) that Safaee and Martellini were proposing—as opposed to investing in a standard fixed-income product assumed to be benchmarked by/represented by the US aggregate bond index.(...)" 

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‘Retirement Bonds’ could increase income, lower risk: EDHEC, Retirement Income Journal, 16/12/2021