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U.S. President Barack Obama. (Jonathan Ernst/Reuters)
U.S. President Barack Obama. (Jonathan Ernst/Reuters)

Three charts: Retail investors warm to alternative investments Add to ...

Consider the alternative

Faced with volatile markets and retirement savings gaps, retail investors are turning to a sector that was once the preserve of institutions.

Alternative investments such as hedge funds, commodities and infrastructure plays are growing popular among retail managers who are seeking out better returns and a wider range of opportunities for their clients, says a new report by consultants McKinsey & Co.

Fueling the move is the disillusionment with the investing industry’s emphasis on relative returns – how well a fund does compared to a benchmark. If the market as a whole goes down 10 per cent, a fund that loses 5 per cent has strong relative returns, but still loses money for investors. Investors now want absolute returns– profit regardless of how the market performs. Alternative investments hold out the promise of achieving that.

By 2015, the consulting firm expects retail alternatives to account for a quarter of retail revenues and a majority of revenue growth.

The case for more immigrants

The greying of Canada has far reaching implications for policy makers. As growing numbers of baby boomers reach retirement age, it will become crucial to find skilled labour to replace them. One way to maintain our living standards is to put more emphasis on immigration.

Canada has historically accepted the equivalent of about 0.8 per cent of its population in new permanent residents every year, says a report by Toronto-Dominion Bank. But the country’s current target of 250,000 immigrants per year may fall short of what the economy needs after 2016.

Beyond 2016, “that portion of the baby boomer generation … will begin to push beyond the age of 55 where labour force participation rates begin to fall dramatically,” say the authors.

Canada would have to accept at least 350,000 immigrants a year over the medium term to take up the slack. It cautions, however, that until reforms are put in place to address the poor economic outcomes of newcomers , it’s probably counterproductive to raise the current target.

The presidential query

One of the most popular questions in this U.S. election year is whether Americans are better off today than they were four years ago, when Barack Obama took office.

The folks at Capital Economics looked into the matter and conclude that the answer depends on how you phrase the question.

They cite U.S. Census Bureau data showing that, on Mr. Obama’s watch, the inflation-adjusted median household income slumped to a 16-year low, while income inequality rose. The top 5 per cent of U.S. earners – those making $186,000 (U.S.) or more per year – received 22.3 per cent of all income last year, up from 21.3 per cent in 2010.

The growing level of inequality is demonstrated by an economic calculation known as the Gini coefficient. A Gini coefficient of zero indicates that income is spread equally among the population while a coefficient of one means all the income is held by one person. The Gini coefficient for the U.S. now stands at its highest level since records were first kept in 1975.

But if you ask if the U.S. economy is doing better, you get a less cut-and-dried answer, say editors Paul Ashworth and Paul Dales. Yes, real GDP per capita in the U.S. has fallen, but it has in most comparable countries as well. And the fall in the U.S. has been much smaller than in many countries, including Japan and Great Britain.

 

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