We have compared the performance of savings plans within the class of difference capital guarantee mechanisms: from the stop loss to classic investments in actuarial reserve funds. CPPI strategies with different leverage factors can be viewed as a compromises between these two extremes. In bullish markets savings plans with a high equity ratio perform the best, in bearish markets the classic insurance concept shows better returns. A stop loss strategy suffers from gap risk, whence a CPPI strategy combines the strength of both gap risk minimization and equity ratio maximization. The effect of fees on the savings plans dominates the performance, especially in typical fee structures found in the German Riester-Rente. The private investor is advised to check carefully if the federal cash payments can compensate the fees taking into account his own salary and tax situation.
CPPI stop loss capital guarantee mechanisms retirement provision plan Riester-Rente