At FWU, we want to ensure that our investors have a market exposure that best suits their risk profile at all stages of their savings career. The reason we believe strongly in this is because we are acutely aware of the inappropriate asset mix and hence risk profile that many people hold and therefore want to make the entire process easier for them. Thus, Forward Quant has an ‘automatic’ asset allocation concept embedded in the product, whereby we ensure that clients have the correct mix between stocks and bonds, depending on their stage of life. Our goal is to make investing easy!



A recent study by the Swiss bank UBS found that millennials, people aged between 20 and 35, hold 65% in cash or fixed income instruments. But this type of asset mix is inappropriate for someone who is just embarking on a career and is thus moving firmly into the accumulation phase of their life. During this phase, investors can afford to be less risk-averse given the long stream of income years still ahead of them. In other words, during this period there should be a large allocation towards stocks, which is, in turn, why we have designed the first phase of the Forward Quant investment concept with the bulk of the investment in the stock market.

While it is, of course, true that stocks can be volatile in the short term, over longer periods stocks have always proven to generate a positive return – annualised at around 10%. Moreover, looking at the MSCI World – a proxy for the ‘global’ stock market – there has never been a 15-year period with a negative return. The reason behind this is very simple: by investing in global stocks, one is making a claim on the global economy. And as long as the global economy keeps growing – as it has been doing despite countless wars and crises – then that claim will rise in value. To put it bluntly, for younger people with plenty of savings years and earnings potential ahead of them, the opportunity cost of not being in the stock market is simply too great and hence a large exposure is warranted.

Once we move towards the latter stages of life and/or the end of the policy, when the invested capital is needed, the picture does begin to change. As we mentioned above, in the short run the stock market can be a precarious place to be. It would, for example, have been extremely unfortunate for someone to have moved into retirement or see their policy expire in 2008 while being fully invested in the stock market. For this very reason, we want our customers to move into capital preservation mode as they move towards the end of the contract, by focusing on fixed income and money market investments.