Suggested areas of reseach for 2013

1.  Social Finance & Impact Investing -  measuring non-financial returns

• The nascent Social Finance and especially "Impact Investing" market involves pursuing outcomes other than simply maximising return for a given level of risk.
• Much work is needed to measure these non-financial outcomes arising from this type of investment - e.g. reduction in re-offending rates, reduction in poverty, decreases in infant mortality, other healthcare improvements, etc.
• Actuaries are well placed to apply our skillset to evolving current work in this space and leading on developing new and standardising existing metrics.
• Related research could include the role of Social Finance/Impact Investing as an asset class in institutional/retail client portfolios.
• Actuaries can also add value both in promoting these allocations and developing due diligence procedures to identify initiatives which give the most effective use of capital (using both financial and non-financial measures).
• This work could be extended to consider how social finance investments and related philanthropic allocation of capital could be benchmarked.

   

2.  'Disintermediation': the likely rise of Peer-to-Peer Investing and Alternative Financing Models

• Improvements in technology and the internet are likely to support increasing disintermediation in the world of investments, already visible in the development of peer-to-peer lending and savings as well as micro-finance/philanthropy (e.g. kiva.org).
• Research could focus on how this market may emerge, what challenges it may face and what tools could be put in place to address these.
• Trust will be a key  requirement to convince consumers to invest peer-to-peer and research could explore how social-networking and related tools (like 'crowd-sourced' reliability ratings) could be used to differentiate between investment opportunities.
• Related to this is the idea of firms raising capital directly from consumers rather than via intermediaries like investment banks/IFAs (e.g. Hotel Chocolat's bond issue to their loyalty club which paid coupons in kind as boxes of chocolates).
• Research could focus on whether this type of alternative financing model is likely to be scalable and again on how trust issues could be dealt with.

3.  Why Retire? Alternative models to pensions

• The concept of pensions can be seen as outmoded in current times of increased longevity and paltry annuity rates.
• Research could focus on alternatives building on the existing notion of 'drawdown' pensions for those with large pension pots and considering what could be done for other consumers.
• Ideas could also include moving away from the notion of an individual to that of family or other groups supporting each other inter-generationally.
• Research could consider what sorts of investment ideas / vehicles could support alternative models, including possibly resurrecting ideals like mutual associations.

4.  Designing Investment Vehicles to Mitigate Agency Risk

• Acknowledgment that current investment structures in both retail and institutional space present agency issues.
• Issues include governance and fee structures which could result in needs of investment managers not being aligned with those of the ultimate beneficiaries.
• Shortcomings in current structures could be analysed with proposals for alternatives to mitigate agency risk.
• Alternative ideas include mutual structures where beneficiaries are also owners.

5.  How and Why to Get Actuaries into the Wider Fields - especially Education Actuaries could be adding value in a much wider range of fields than is the case today

• This research could focus on why it would be of benefit to individuals, the IFoA and wider society for actuaries to do so.
• Research could include case studies of actuaries working in wider fields and their stories as to how they got there + how they add value.
• Recommendations could include how existing syllabi could be revised to promote this.
• A good model is "TeachFirst", the highly successful organisation which takes top graduates from across the UK to work as teachers in underperfoming schools before starting their professional career (http://www.teachfirst.org.uk).
• Recommendations could also include how to make a career in actuarial education attractive to highly performing individuals.