Apr 14, 2022
Welcome back to the show all about sensible investing in Canada!
Today we have yet another masterclass with a wonderful guest,
Sebastien Betermier. Sebastian is an Associate Professor of Finance
at Desautels Faculty of Management at McGill University, where he
teaches investment management, applied investments, and pension
funds retirement systems. We have a deep, thoughtful, and precise
conversation with him about his recent research and papers, much of
which stands in contrast to our usual fare on the show. In our
chat, we dive into the nuts and bolts of asset allocation, hedging
risk, and his research into what demographics can teach us about
investment behaviours and returns. We also hear from our guest
about interesting topics of expected persistence and tilting
towards value stocks, before shifting the conversation towards
homeownership and property investment. Sebastien provides some
sound advice around when it might be a good idea to purchase
property over other asset classes, and we evaluate this position
from a number of different investing perspectives. Lastly, we spend
some time looking at pension plans, and what we can learn from
those available in Canada right now.
Key Points From This Episode:
- Sebastien explains the theoretical relationship between labor
income and financial asset allocation.
- Findings on hedging labour income risks and the paper that
Sebastien published on the subject. [0:06:47]
- The relationships between risk and age, gender, wealth, and
heterogeneity across households. [0:10:05]
- Unpacking Sebastien's investigation into value and growth
- The effect that the characteristics of labor income have on the
rate of progression on the value ladder.
- What we can learn about expected persistence in the value
- Weighing the possibility of predictive demographics for future
value premiums. [0:24:29]
- Advice for young investors looking to tilt towards value
- Explaining differing returns according to the characteristics
of people. [0:29:41]
- Sebastien explains the factors of markets, wealth, and age, in
the pricing model. [0:31:24]
- Understanding how investors tilt to age and wealth factors, and
what these portfolios look like. [0:38:19]
- The impact of age and wealth factors on wealth inequality, and
how younger investors can combat this.
- Possible rationales for homeownership and the storage of wealth
in housing. [0:44:26]
- The household characteristics that are predictive of larger
allocations to housing. [0:48:49]
- Economic importance of risk-free benefits of homeownership.
- The decade-long rule of thumb for purchasing property;
Sebastien weighs in. [0:55:31]
- Why asset-only performance is not the only correct way to
measure the success of the Canadian pension fund model.
- Differentiating asset-only performance and liability-hedging
performance measurement. [1:02:29]
- A list and explanation of the assets that Canadian pension
funds use for hedging real liabilities.
- Lessons from the Canadian Pension Plan for individual investors
and firms. [1:12:54]
- Sebastien's personal definition of success: making the most of
opportunities and a balanced life. [1:16:07]