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Equity investors have twice suffered large losses, known as `drawdowns' on their investments in the last dozen years: in 2001 and 2009. This applies to both individuals and institutions and has had an adverse effect on both individuals' living standards entering retirement and the attitude of individuals to the advantages of long-term asset accumulation. The research of Professor Andrew Clare and Professor Stephen Thomas at City University London has created commercially available investment products that offer superior risk-adjusted returns with a transparent strategy supported by published, peer-reviewed research and which avoid such large losses. They developed a simple `trend following' 'smoothing` technique to create a diversified, developed market equity fund which was launched by WAY Fund Managers in March 2011. At the start of 2013, following the success of this strategy, the researchers launched an investible index, the Cass Trend Master Index, in collaboration with Credit Suisse. This index now forms the basis of several structured products predominantly aimed at institutional investors. In April 2013 the researchers launched another set of investible indices, based on the same investment principles, with Goldman Sachs and Indexx Markets. These focus on single asset classes including equities and commodities.
Research carried out by Cairns (Maxwell Institute), Blake (Cass Business School) and Dowd (Nottingham, now Durham) in 2006 produced the `CBD' model for predicting future life expectancy. The CBD model and its extensions developed in 2009 by Cairns and collaborators have had a major impact on pensions and life industry risk management practices: multinational financial institutions [text removed for publication] and other stakeholders have relied on the CBD model to risk assess, price and execute financial deals [text removed for publication] since 2010. CBD is also used by risk management consultants to advise clients, is embedded in both open-source and commercial software, and is used by the UK's Pension Protection Fund to measure and manage longevity risk.
Research by Cathcart, McNeil (both Maxwell Institute) and Morrison (Barrie & Hibbert) during the period 2008-2012 has developed a methodology based on least squares Monte Carlo to value complex insurance liabilities and manage their risks. This methodology has been adopted by Barrie & Hibbert (B&H, part of Moody's Analytics) and has enabled the company to develop an internationally leading proposition for valuing insurance products. This has generated £2.5M in revenue since 2011, through implementation in 5 new products and use in 12 new consulting projects.
This case study charts the influence of the Risk On / Risk Off (RORO) paradigm, developed in research at the University of Oxford in collaboration with investment bank HSBC. Since 2008, RORO has had a significant economic impact on HSBC as well as wider impact on the thinking and actions of investors and other global market participants. Having begun as a specialised research tool within HSBC's foreign exchange team, the RORO methodology was publicised in the advice that HSBC supply to a wide range of major fund managers, corporate institutions and central banks. The research has led directly to a change in the way that asset managers think about investment decisions, with consequent impact on the investment and risk management strategies they undertake. RORO is regularly featured in the financial press and is becoming increasingly mainstream, with coverage in national and international media aimed at retail investors.
Research founded on population-based cohort studies has directly informed NICE Public Health guidance on the prevention of diabetes. In prospective studies Wareham and Griffin demonstrated that diabetes can be predicted by a simple risk score using routinely available information and by HbA1c levels. Although people with a high HbA1c account for 36% of incidence, the majority of future cases emerge from the larger population of people with moderately elevated levels, justifying a more population-wide perspective on the prevention of diabetes. The research also showed that the same behaviour targets that are effective in high risk individuals are strongly associated with diabetes in the wider population.
Our research has used epidemiological insights, data and methods to enable Legal & General (L&G), a major pensions and annuity provider, to understand the drivers of long-term trends in the annual rates of improvement in mortality in older ages. Our first-ever analysis of inequalities in mortality trends by cause of death over 25 years in England, and future projections of these, has resulted in better informed pricing and risk management (capital reserving) practices at L&G. We also modelled how much of the decline in coronary heart disease, the main contributor to improving life expectancy, was due to improved healthcare versus healthier lifestyles. Projections of these, based on plausible scenarios of evolution of risk factors and disease management, helped strengthen the evidence base for L&G's assumptions of mortality improvements for the UK financial regulators.
For about a decade, Professor Nick Bostrom and others have been pursuing research on what he calls `existential risk': this research deals with basic threats both to the quality of our future life and indeed to our having any future life at all. This work has had considerable impact on policy. Professor Bostrom has been invited to play a large number of advisory and consultation roles, to government departments and major insurance companies among many others. His work has also attracted a huge amount of attention among the wider public. He has been invited to give prestigious public lectures, and he has given many interviews on his ideas to the media - thereby contributing to the public awareness of the huge risks at stake.
The Coalition government's manifesto commitments to remove compulsion in the annuity market necessitated a decision about a Minimum Income Requirement (MIR). Cannon's contribution to the government consultation played a significant role in setting the MIR. Previous research by Cannon had shown that the UK compulsory-purchase annuity market was efficient because compulsion expanded market size (more than half of all annuities are sold in the UK) and reduced selection effects. This research enabled the government to justify retaining an element of compulsion. The precise level of the MIR used in the 2011 Finance Bill was based upon the methodology proposed by Cannon.
QRISK is a new algorithm which predicts an individual's risk of cardiovascular over 10 years. It was developed using the QResearch database and is in routine use across the NHS. It is included in national guidelines from NICE and the Department of Health and in the GP quality and outcomes framework. It is incorporated into > 90% of GP computer systems as well as pharmacy and secondary care systems. The web calculator has been used >500,000 times worldwide. ClinRisk Ltd was incorporated in 2008 to develop software to ensure the reliable widespread implementation of the QRISK algorithm into clinical practice.
Through Community Finance Solutions (CFS), an award winning research and development unit of the University of Salford, which addresses financial and social exclusion, Improving the Sustainability of Micro-financial Institutions is focused on providing leadership in increasing the sustainability of micro-financial institutions (MFIs) that provide credit or loans to the financially excluded, demonstrating the following impact: