Invest

Making the Most of Multi-Assets Strategies

31 October, 2017
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“With rising equity prices and falling bond yields, the 60:40 portfolio has proven difficult to beat since the global financial crisis.”

It’s a fact of life that nothing works well all the time. That’s where multi-asset strategies have a valuable role to play in investors’ portfolios. Yet deciding when, for whom and how multi-asset strategies should be implemented is a complex calculus. Here we detail the four main types of multi-asset strategies and their benefits compared to traditional static allocation approaches, as well crucial considerations for those implementing multi-asset strategies.

The strength of multi-asset strategies lies in adopting varying approaches to asset allocation, with contrasting views and contrasting bets on the future. To implement multi-asset strategies, however, investors should understand not only the reasons they can be beneficial, especially in the current market environment, but also the different styles of multi-asset strategies that exist and how to successfully implement them.

The Case for Multi-Asset Strategies
 

Asset allocation is typically the most significant driver of a portfolio’s return, but is typically determined by a single individual or committee and a single framework. By contrast, large teams are deployed to focus on manager selection and security selection—despite the fact that this generates less value, net of fees.

This disparity in resources and concentration of decision making power arguably represents a vulnerability to most investors’ portfolios. Many multi-asset strategies, on the other hand, seamlessly blend a wide variety of approaches and parameters into a single strategy.

 

 

Types of Multi-Asset Strategies
 

A highly diverse population of multi-asset strategies has emerged, but the strategies can be grouped into four basic categories.

  1. 1. Core: These strategies are predominantly driven by traditional beta, with relatively limited tactical asset allocation.
  2. 2. Idiosyncratic: More focused on absolute returns, idiosyncratic strategies provide access to a broader range of return drivers and are more dynamic in their asset allocation, resulting in greater downside mitigation than core strategies.
  3. 3. Risk parity: These encompass a broad range of approaches to building a risk-balanced portfolio, often by leveraging lower-volatility assets.
  4. 4. Diversified inflation: These attempt to build an inflation sensitive portfolio, typically with an absolute return target. Example holdings include treasury inflation protected securities (TIPs), natural-resource equities and commodities.

Many investors have been disappointed with the performance of multi-asset strategies in recent years. This perceived underperformance is in part due because investors compare these strategies to a traditional 60% equity: 40% fixed income portfolio. With rising equity prices and falling bond yields, the 60:40 portfolio has proven difficult to beat since the global financial crisis. Multi-asset strategies have also lagged due to more diversified sources of return. So why bother with multi-asset strategies? Here are four reasons:

1. Mean reversion: It’s unlikely that the 60:40 portfolio will continue to be upheld as a standard of measurement. Bonds and equities can no longer be considered cheap, which makes it challenging to repeat recent successes.

2. Rising correlation between bond and equity returns: This reduces the diversification within a traditional 60:40 portfolio and indicates that portfolios with a broader range of return drivers and less reliance on beta will be the norm going forward.

3. Reflation: Even modest inflation could challenge traditional portfolios given low bond yields and current equity valuations.

4. Forward-looking risks: From politics and rising protectionism to the unknown impact of central banks shrinking their balance sheets, a number of factors suggest the future may look quite different than the past.

To highlight the potential benefits of holding a more diversified portfolio in the hypothetical example shown here, we compare how a 60:40 portfolio may perform relative to a portfolio that takes 10 percent away from both equities and bonds and allocates it into an idiosyncratic multi-asset strategy, chosen because of the diversification benefits and opportunity set such a strategy may present to today’s investors.

In a downside scenario—one where a 200-basis-point upward shift in the yield curve is complemented by a 15% fall in equity prices—the 60:40 portfolio returns -13.9 percent, whereas the portfolio which has a small allocation to an idiosyncratic multi-asset strategy returns -9.8 percent, even assuming the multi-asset manager underperforms its investment objective.

In a base case, where bonds return their current yield and equities deliver in line with Mercer’s capital market assumptions, the performance is virtually identical, and including a multi-asset strategy may improve the outcome by about 30 basis points.

In an upside scenario, where equities return 15% and the yield curve moves up by only 50 basis points, we see an 8.3% return for the 60:40 portfolio, while the portfolio including the multi-asset component only underperforms by around 30 basis points.

 

The argument for including a multi-asset strategy within a broader diversified portfolio is compelling.

Doing so offers more robustness in significant downside scenarios, slight outperformance in all market conditions, and only slight underperformance in strong market conditions.

Landing Multi-Asset Strategies
 

Several issues deserve consideration when thinking about using multi-asset strategies.

First, it’s important to take a forward-looking approach when thinking of combining these strategies, based on a good understanding of investment approaches used and the typical biases within those strategies. Typically we look for correlations below zero when blending managers, but in the multi-asset space, aiming for the 0.4 to 0.6 correlation band is a realistic figure that will still provide meaningful diversification benefits over time.

The second factor to consider is client characteristics, which a couple of examples will help illuminate. Mercer typically recommends allocating to a diversified hedge fund exposure, but this may not always be realistic for all clients. This is where multi-asset strategies can come into play.

For a client with an established strategic asset allocation dominated by traditional beta, idiosyncratic strategies bring the biggest bang for the buck in terms of diversification and downside mitigation. However, some core and risk-parity strategies also confer benefits, given their unique risk/return profile. Again, the choice comes down to taking a forward-looking approach and determining whether these strategies continue to perform given the market backdrop.

 

 

By contrast, consider a client who has a static asset allocation with fixed income, mostly government-bond and investment-grade credit, plus some equities, and cannot go beyond these asset classes because of governance, resources and even lack of expertise. In this case, multi-asset strategies bring in additional diversifying exposures and introduce some dynamism into the tactical allocation, without the complexities of introducing a tactical asset allocation overlay.

A third important factor is the risk of manager diversion. Investors often compare multi-asset strategies to traditional 60:40 benchmarks—an inappropriate comparison that nonetheless may lead managers to abandon their discipline and focus on outperforming the 60:40 rather than their own strategy benchmark.

As a hypothetical example, consider two multi-asset managers, both with cash-plus benchmarks.

Manager A retains their discipline, but Manager B, possibly under pressure from clients, manages the strategy by not straying too far from the 60:40 portfolio. If equity markets were to crash, Manager B would significantly underperform Manager A. Following that, Manager A, despite being aware of Manager B’s poor performance, may be afraid to cut their equity allocation for fear of underperforming the other managers on the equity-market rebound.

Looking at calendar year returns in 2008, the median idiosyncratic strategy returned -9.6 percent, compared to -24.6 percent for the 60:40 portfolio. So in a market environment like the global financial crisis, losing discipline can cost you around 15% in returns.

Finally, in order to truly make the most of multi-asset strategies, clients need to gain comfort with relatively unconstrained investment guidelines, in particular the use of leverage and derivatives. This is particularly true for strategies that have a low equity beta, as there is a need to lay off the non-idiosyncratic risks to take advantage of idiosyncratic opportunities or lowly correlated investment ideas. Having a wide variety of instruments broadens the opportunity set and gives the manager discretion to implement in the most efficient manner.

By contrast, the opportunity cost of not gaining comfort with leverage and derivatives is substantial. Without exposure to those lowly correlated assets, a portfolio would be at risk in the event of an equity or bond market crash. Multi-asset strategies can play an important role in diversifying investors’ asset allocation frameworks and philosophies, while also broadening the set of return drivers and diversifiers to improve portfolio robustness.

 

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Varun Khosla | 03 Oct 2019

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The region has experienced a major inflection point, with VC investors in Southeast Asia investing over $7.8 billion across 327 deals.2 There's one key component all these startups need, however: leadership. But attracting and retaining executive-level talent and management teams can be a major challenge for these burgeoning startup hotbeds, especially when it comes to compensation. Corporate Investors Are Changing Executive Compensation   Many of the world's most recognizable startups were launched by charismatic, individual founding partners, such as Jeff Bezos, Jack Ma and Mark Zuckerberg. However, the rise of these luminaries and their compelling stories do not mirror the new era of startups blossoming around the world. In the Middle East and North Africa (MENA), for example, investment companies are providing the initial financial backing needed to launch startups. 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Since most global startups today are built around investment companies instead of inspirational individual founders, these companies must be diligent when determining how or how much to pay the executives — who can ultimately mean the difference between success and failure. How Much Should Executive Compensation Be?   Investment companies naturally want to maximize their profits, which means they want to retain as much equity in the startup and as many shares of the startup as possible. Every dollar, share of stock or option paid to startup executives is money the investment companies surrender to operational costs. However, low-balling startup executives or opting to hire those who aren't as skilled or experienced also comes with the risk of undermining the startup's ability to compete, grow and drive revenue. Financial arrangements that provide management with a potential share of equity (or shadow equity) require careful thought and consideration. An executive compensation plan must act as an incentive and retention device for startup executives while delivering a fair return to investors and shareholders who have funded the company. Investors and shareholders must decide how much dilution of equity they are willing to accept to provide an appropriate equity pool for the management team. This is why many companies decide to execute a scaled approach that decreases the size of the equity pool with each round of funding to accommodate the increasing value of the company. This type of program impacts the dilution of equity and can allow for more creative compensation strategies — particularly when dealing with more sophisticated startups, such as in the pharma and fintech industries, which require the talent and knowledge of more accomplished professionals and leaders. 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Or should executive compensation be based on employees performing their jobs to the best of their abilities, regardless of the outcomes — which are often determined by external economic forces beyond their control. Many startups now implement the former strategy, believing that benchmarks for returns on investments motivate executives and provide them with the extra incentive to do everything possible to create shareholder value. In fact, in a majority of cases, long-term incentive plans only pay out when investors receive a return. Alternately, some startups choose to compensate executives and management based on specific, mutually agreed upon corporate goals and objectives. Compensation can then be provided as cash or shares, though there may be restrictions on when those shares can be sold or vested or whether they come in the form of options or full-value shares. Startups are popping up all over the world, ushering in a new frontier of ideas and innovation, as well as investors and executives who will create the next generation of future unicorns. As new trends continue to emerge for how executives in these startups are compensated, global startups will need to review their options with scrutiny to attract the best executive talent while maximizing returns for investors. Sources: 1. "2018 MENA Venture Investment Summary." MAGNiTT, January 2019,https://magnitt.com/research/2018-mena-venture-investment-summary. 2. Maulia, Erwida. "Southeast Asian 'turtles' return home to hatch tech startups." Nikkei Asian Review, 22 May 2019,https://asia.nikkei.com/Spotlight/Cover-Story/Southeast-Asian-turtles-return-home-to-hatch-tech-startups.

Fiona Dunsire | 05 Sep 2019

The markets across Latin America, the Middle East, Africa and Asia are some of the most exciting in the world, amid a backdrop of economic growth and changes in demographics, investment markets and regulations. Mercer's Growth Markets Asset Allocation Trends: Evolving Landscape report examined retirement plans in 14 of these markets, with a look at current investment positions and changes over the past five years. The study included retirement fund assets of almost $5 trillion across markets in the Southern and Eastern hemispheres. These areas offer exciting potential for asset owners, managers and investors, as almost 70% of global growth now comes from these economies, according to the World Bank. We are also seeing a rapid expansion of the middle class, creating different patterns of consumption and savings. In addition, half of the top 50 global institutional investors are located in these markets.1 The Global Investment Landscape Is Becoming More Robust   Because the economies of Latin America, the Middle East, Africa and Asia are large and growing, with a rising share of wealth being held by individuals, they are of particular interest to investors around the world. These markets are also becoming increasingly open to foreign investors. At the same time, regulatory changes within these regions are allowing domestic investors to invest more broadly and outside their home markets. All these developments translate into a more open and robust investment landscape, with increasing opportunities for investors across the globe. The pension and savings systems in these regions are also undergoing reform, with the same trend toward increasing individual responsibility for retirement savings as seen in Western countries. Overall, we are seeing a shift to defined contribution (DC) plans at the expense of defined benefit (DB) plans across both corporate and government-sponsored schemes. These changes further emphasize the need to deliver effective investment solutions to meet future savings needs and ensure trust in the systems. 3 Ways Investors Are Responding   Investors and plan managers are responding to the changing environment in three key ways: 1.  More investors are putting money in equities. In the past five years, equity allocations rose approximately 8%, from 32% to 40%. For investors in many jurisdictions, the shift was intended to increase expected returns on the portfolio. Investors across the world face challenges amid an increasingly competitive investment landscape and a low return environment. Adding equities to the portfolio mix should offer greater return expectations over time. 2.  Market liberalization is enabling more diversified portfolios, through increased exposure to foreign assets at the expense of domestic assets. On average, foreign exposure in retirement plans increased from 45% of the overall equity portfolio to 49% in the past five years. Investors sought greater geographic diversification, especially in Colombia, Japan, South Korea, Malaysia and Taiwan. In some countries, such as Brazil, Colombia, Peru and South Africa, recent changes in legislation now allow increased foreign asset exposure. In Japan, the Government Pension Investment Fund has seen a move to more foreign equities at the expense of domestic equities in recent years. The shift to foreign assets was also present in fixed income, with the proportion of foreign allocations rising from 16% to 23%, in part due to less attractive local interest rates, as well as a search for increased diversification. Significant home biases remain; however, we expect this trend to continue as regulatory changes support broader global investment. 3.  Investors are showing slightly more interest in alternative investments. More investors are including alternatives in their portfolios, and Mercer expects that trend to continue on an upward trajectory. Among those investors who provided details on their alternatives asset allocations, more than 70% of the average allocations went to property and infrastructure, and approximately 20% went to private equity. Changing regulations have made alternatives more attractive for investors in some areas. For instance, in Chile, a 2017 reform to the investment regime passed, allowing pension managers to invest in alternatives up to 10%, though specific limits vary by portfolio. The main objective of this enhancement is to boost returns and ultimately retirement incomes. As investors seek to diversify their portfolios and seek return enhancement, we expect alternatives exposure to continue to grow over time. We hope investors use our report's findings as an opportunity to review their own portfolio and determine where they can improve their asset allocation to achieve even better investment outcomes. To learn more, download the full report here. Sources: Top 1,000 Global Institutional Investors." Investment & Pensions Europe, 2016. https://www.ipe.com/Uploads/y/d/w/TOP-1000-Global.pdf

Katie Kuehner-Hebert | 22 Aug 2019

As companies continue to migrate to all things digital, this wave of transformation will inevitably wash over every area of work, digitizing everything from finance functions and tax compliance to data analytics and beyond. Approximately 73% of executives predict significant disruption within their industries in the next three years, according to Mercer's Global Talent Trends 2019 report. This number, up from 26% in 2018, is greatly due to digital transformation. More than half of executives also expect AI and automation to replace one in five of their organization's current jobs. While this might worry some organizations, these two earthquake changes stand to create 58 million net-new jobs by 2022. Business leaders responding to Mercer's annual survey have mixed opinions on the economic growth these technological advances will have across the globe. Digitization may promise increased opportunity, but it also bodes increased competition from a host of new — and possibly more nimble — players. Assessing the Economic Outlook Across the Globe   The turbulence within the global economic landscape is compounded by uncertainty over how trade tensions between the U.S. and China are resolved, according to the Mercer report Economic and Market Outlook 2019 and Beyond. The U.S. economy may slow somewhat due to higher interest rates, while the Chinese economy will remain dependent on how the trade tensions are resolved. Other emerging market economies should continue to grow at roughly the same pace, with the possibility of stronger growth when trade tensions ease. Mercer's Themes and Opportunities 2019 research report notes "mounting evidence of over extension of credit" is creating further white-water turbulence, with the uncertainty over how the central banks' retreat from market involvement after massive liquidity infusions will impact economies. The report also notes that there is a distinct possibility "the pace of globalization could slow, pause or even go into reverse" due to political influence, particularly on trade. In addition, there are increasing expectations from governments, regulators and beneficiaries to have asset owners and investment managers incorporate sustainability as a standard action. Digitally Transforming Tax Compliance   Companies navigating all these shifting sands will increasingly look to digitization to help manage and respond to both opportunities and obligations — including tax compliance across geographies. This is also a moving target, particularly in Asia, as some countries are now implementing digital technologies to improve their tax collection efforts. In 2015, the average tax-to-GDP ratio for 28 economies in the region was only 17.5%, which is just over half the average tax ratio of 34% among OECD economies. There has been a great deal of progress with the use of electronic filing of tax returns for major taxes in India, Kazakhstan, Malaysia, Mongolia, Nepal, Singapore and China. Moreover, mandatory electronic payments are now required by revenue bodies in the People's Republic of China, Indonesia, Mongolia and Vietnam.1 Digitization and increased tax regulation are also intended to vastly improve collection efforts, though much more push is needed. Governments are making great strides within their tax administration efforts with the aid of digitization — including sending eAssessments to businesses for taxes owed, based on electronic auditing systems.2 If the systems find discrepancies within sellers' monthly tax reports, it automatically issues an eAssessment that includes interest and penalties. Andy Hovancik, President and CEO at Sovos, puts it plainly: "Bottom line — tax enforcement is now embedded in the most important business processes, changing the world of tax and disrupting decades old business processes. As a result, tax is driving digital transformation in finance and accounting departments. Now more than ever, businesses need a new approach to tax automation to ensure compliance."2 Finance executives agree, including Michael Bernard, chief tax officer for transaction tax at Vertex Inc. He states, "Governments worldwide are turning to new forms of compliance, like e-invoicing regulations, which require IT departments to embed workflows in core processes, and real-time VAT compliance checks. In 2019, finance organizations will begin to factor tax considerations into their digital transformation strategies. An effective road map will include actions for using data to link business processes and tax compliance obligations."3 Guiding Business Strategy With Compliance   Digitization alone won't enable companies to better comply with new tax regulations — making compliance a central business strategy will. This includes implementing training sessions across the enterprise to help employees develop a state of mindfulness when it comes to compliance. But in this era of increased accountability, Leila Szwarc, global head of compliance and strategic regulatory services at TMFGroup, states that companies should re-imagine the notion of compliance as a "business enabler" that can distinguish it from competitors.4 According to Szwarc, "Compliance should be seen as a business enabler rather than as a drain on development, but this can only happen if businesses work in an integrated way to bring creative solutions to the related organizational challenges." She continues, "As APAC firms face up to a new regulatory era, compliance teams have a key role to play in both protecting their firms' interests and helping to drive long-term competitive advantage." With an uncertain market ahead and vast changes on the horizon, it's more important than ever to get ahead of the curve and think about how your business can not only survive the wave of digital transformation coming but also thrive with it. Start planning your business strategy, placing compliance and digitization at the heart, with these considerations in mind today, and you'll be better off tomorrow. Sources: 1.Suzuki, Yasushi; Highfield, Richard. "How digital technology can raise tax revenue in Asia-Pacific." Asian Development Blog, 13 Sept. 2018, https://blogs.adb.org/blog/how-digital-technology-can-raise-tax-revenue-asia-pacific./ 2.Hovancik, Andy. "How Modern Taxation is Driving Digital Transformation in Finance." Payments Journal, 16, Jul. 2018, https://www.paymentsjournal.com/how-modern-taxation-is-driving-digital-transformation-in-finance/. 3. Schliebs, Henner. "2019 CFO Priorities: Experts Predict Top Trends." Digitalist Magazine, 18 Dec. 2018, https://www.digitalistmag.com/finance/2018/12/18/2019-cfo-priorities-experts-predict-top-trends-06195293. 4.Szwarc, Leila. "Regulatory compliance – The new business enabler." Risk.net, 18 Mar. 2019, https://www.risk.net/regulation/6485861/regulatory-compliance-the-new-business-enabler.

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Abdulaziz Alajlan | 17 Oct 2019

For many decades, Saudi Arabia — as a nation, culture and economic force — has been inextricably tied to oil exports and the energy industry. However, a bold new vision, named Saudi Vision 2030, aims to wean the country off its dependencies on fossil fuels through the creation of sweeping new reforms and policies. This vision looks to modernize Saudi Arabia, both as a domestic society and a global financial powerhouse. The Power of Embracing Change   In 2016, Crown Prince Mohammad bin Salman bin Abdulaziz Al-Saud led the unveiling of the Saudi Vision 2030 initiative, which detailed the nation's unprecedented and extraordinary commitment to emerge as a leader in a rapidly evolving world. As oil prices continue to react to new economic realities and regional political forces shape the roles and objectives of nations throughout the Middle East, Saudi Arabia's decision to proactively embrace change could have extraordinary foreign and domestic ramifications. With a population of more than 33.4 million people and a median age of 25, Saudi Arabia faces a future filled with significant challenges and opportunities.1 Saudi Vision 2030 is a road map for how the nation will empower its millions of young citizens to work and thrive in a globalized world that increasingly views petroleum as an outdated and harmful source of energy. A shift in long-established revenue resources and economic paradigms requires a fundamental shift in local workforce skill sets and proficiencies with modern technologies. As other nations are slow to adjust to climate change and other geo-economic shifts, Saudi Arabia is poised to exemplify to the rest of the world how governments can leverage policy reform to enhance the lives of people both inside and outside the country's borders.2 Accommodating a Complex Global Economy   Saudi Vision 2030 will have a profound impact on rapidly growing economies, such as India, that seek to leverage digital transformation while implementing innovative domestic and workforce policies. In fact, the fate of Saudi Arabia and India are becoming increasingly intertwined, as India — unlike many western economies — requires more oil to empower its robust economic rise. Industrialized markets, in areas such as Europe and the United States, are seeking greener alternatives and more electric vehicles for transportation demands, but India remains heavily dependent on fossil fuels. By 2040, India will need to process up to 10 million barrels of crude oil every day to support its expanding economy and progressively urbanized populations.3 Saudi Arabia, a nation that already has a few notable government policies elevating the standard of living for its citizens (such as offering free college education to all citizens), is further internationalizing its economy by prioritizing privatization. The 2030 plan encourages financial institutions to promote private sector growth, marking a significant development in how the country is aligning its domestic workforces to compete in a globalized economy. The focus on increasing privatization and other non-oil industries — such as construction, finance, healthcare, retail and religious tourism — will create new opportunities for Saudi businesses and entrepreneurs.4 Creating a Future Through Indigenous Resources   Saudi Vision 2030 addresses many of the local, cultural challenges facing the nation, such as the role of women in the workforce and society, the impact of digital transformation and automation, and the need to modernize the sensibilities of Saudi businesses. Allowing women to drive and granting them greater access to economic prosperity — with the goal of increasing women's participation in the workforce from 22% to 30% — has generated positive responses with global investors. 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Empowering women and integrating modern technologies throughout its economy and government are just part of this comprehensive strategy. By inviting the global economy to invest in its progressive financial mechanisms and bolster tourism through campaigns highlighting the nation's history, Saudi Arabia is poised to lead its people, and the world, into a future forever defined by a new, modern view of the future. Will it work? The world will know in 2030. Sources: 1. Kingdom of Saudi Arabia. "Saudi Census: The Total Population." General Authority for Statistics, Accessed 11 July 2019,https://www.stats.gov.sa/en/node. 2. Mohammed bin Salman bin Abdulaziz Al-Saud. "Vision 2030." Vision 2030, 9 May. 2019, https://vision2030.gov.sa/en. 3. Critchlow, Andrew. "India is too important for oil titan Saudi to ignore." S&P Global Platts, 6 Mar. 2019, https://blogs.platts.com/2019/03/06/india-important-oil-saudi/. 4. Nuruzzaman, Mohammed. "Saudi Arabia's 'Vision 2030': Will It Save Or Sink the Middle East?" E-International Relations, 10 Jul. 2018, https://www.e-ir.info/2018/07/10/saudi-arabias-vision-2030-will-it-save-or-sink-the-middle-east/. 5. "Saudi Arabia Vision — Goals and Objectives." GO-Gulf, 14 Jul. 2016,https://www.go-gulf.com/blog/saudi-arabia-vision-2030/.

Patrick Hyland, PhD | 17 Oct 2019

Feeling stressed by your management responsibilities? If so, you're not alone. In our latest norms, we found that just 67% of leaders and managers think the level of stress they experience at work is manageable; the other third was unsure or overwhelmed. A similar percentage said they struggle to maintain work-life balance. Just half of leaders and managers feel they have enough time to do a quality job, and only 48% feel they can detach from work. These results suggest that anywhere from a third to a half of leaders and managers are struggling to cope with the challenges of their job. When confronted with statistics like these, some just shrug and sigh: "Stress is part of the job, isn't it?" Based on a growing body of research, that's a dangerously defeatist perspective. Aside from the health risks associated with stress, there are a number of dysfunctional workplace dynamics that can emerge when leaders feel rundown, exhausted or emotionally drained. Barbara Fredrickson, Ph.D., for example, has found that negative emotions can trap people in a flight, fight or freeze mindset that limits their ability to think creatively and develop innovative solutions. Janne Skakon and colleagues1 have found that the way leaders cope with their stress trickles down, impacting their employees' own work experience and stress levels. And at Mercer|Sirota, we've found that overwhelmed managers are significantly less likely to recognize and praise their direct reports. If you're chronically stressed at work, it's time to stop buying into the myth that leaders and managers must be selfless martyrs. You're putting your own health and well-being, along with your team's effectiveness and engagement, at risk. Instead of working yourself to exhaustion, start developing a self-care strategy to manage the demands of your job. Here are four steps to consider: 1. Recognize the Warning Signs   Burnout — a state of physical, mental and emotional exhaustion often accompanied by self-doubt and cynicism — is a serious issue. Researchers have found prolonged periods of burnout can lead to a number of physical and mental health problems, including depression, anxiety, heart disease, high cholesterol, stroke and type 2 diabetes. Burnout can manifest itself in a number of ways, including increased irritability, decreased motivation, changes in eating or sleeping habits, or unexplainable aches and pains. 2. Rest and Recover   If you find you are experiencing burnout, you need to take immediate steps to get help. Start by telling someone what you are experiencing. Tell your boss, an HR business partner or a colleague. If you don't feel comfortable telling someone at work, then (a) realize you may be working in a toxic organization2 that is not healthy for you and (b) be sure to tell your family, friends or your doctor. If you remain silent, your exhaustion could lead to isolation and compound your problems. After you have shared your concerns, start finding ways to detach from work. Stop checking email the moment you wake up. Skip unnecessary meetings. Lighten your load. Take a mental health day. If you can reduce your hours or take a vacation, do so. Find ways to rest and reset so you can recover. 3. Reflect and Reorient   After you've gained some distance from your experience, it's time to start identifying the factors that led to your burnout. Start by reflecting on the timeline of events. When did your stress levels first start to rise? What was going on at work? Outside of work? Have you had this experience before, or is this the first time you've experienced burnout? Next, reflect on the nature of your stress. As you've probably heard, stress is not always bad. Researchers have found that challenge stress — the stress associated with achieving an important goal — is positively related to job satisfaction. Hindrance stress — the stress associated with barriers that prevent us from getting work done — is negatively related with job satisfaction. If you've had a burnout experience, you've probably been dealing with a lot of hindrance stress. With that in mind, think about the way work gets done in your organization. Some experts argue that burnout is the result of working in a dysfunctional organization. Finally, consider your own personality, values and attitudes toward work, your organization and your job. Researchers have found that people with certain personality traits are more prone to burnout.3 Through these reflections, your goal is to learn from your experience and gain insights that will prevent future episodes of burnout. 4. Rebuild a More Resilient You   If you have gone through burnout, the good news is this: you can use this experience to become a stronger, wiser and more resilient person. But that will require intentional effort on your part and a commitment to practicing self-care. As you design your own self-care plan, realize that multiple pathways exist. Start by rethinking your approach to your job; you will probably need to change some of your workday habits. Your physical health is critical: researchers have found that leaders and managers are more effective when they are eating right, sleeping well and getting exercise. Your mental perspective is also important: Stanford psychologist Alia Crum has argued that stress can be good for leaders if they know how to manage it. Be sure to consider your emotional response to the vicissitudes of work and life: research suggests that psychological flexibility and emotional agility can make you a more effective leader.4 And as you build your self-care plan, be sure to take a holistic approach, considering all aspects of who you are and what's important to you: research shows that your spiritual life — those aspects of your life that provide a sense of meaning, purpose and coherence — can help increase your resilience. As you consider these four steps, remember this: if you're not taking care of yourself, you're not going to be able to take care of your team — at least not for the long haul. At some point, your patience, your health, your energy, or your effectiveness is going to give. Without some type of self-care strategy, you're doing yourself — and the people who depend on you — a disservice. Sources: 1. Skakon, Janne; Nielsen, Karina; Borg, Vilhelm; Guzman, Jaime. "Are Leaders' Well-being, Behaviours and Style Associated with the Affective Well-being of Their Employees? A Systematic Review of Three Decades of Research." An International Journal of Work, Health & Organisations, Volume 24, Issue 2, 2010,https://www.tandfonline.com/doi/abs/10.1080/02678373.2010.495262. 2. Appelbaum, Steven and Roy-Girard, David. "Toxins in the Workplace: Affect on Organizations and Employees." Corporate Governance International Journal of Business in Society, 2007,https://www.researchgate.net/publication/242349375_Toxins_in_the_workplace_Affect_on_organizations_and_employees. 3. Scott, Elizabeth. "Traits and Attitudes That Increase Burnout Risk." Very Well Mind, May 20, 2019,https://www.verywellmind.com/mental-burnout-personality-traits-3144514. 4. Kashdana, Todd B. and Rottenberg, Jonathan. "Psychological Flexibility as a Fundamental Aspect of Health." Elsevier, Volume 30, Issue 7, November 2010,https://www.sciencedirect.com/science/article/pii/S0272735810000413?via%3Dihub.

Dr. Avneet Kaur | 03 Oct 2019

The use of on-site clinics has been growing in recent years, with businesses realizing the potential for giving access to quality and timely care to contribute to an increase in productivity, reduce absenteeism and improve employee health. But, are you reaping the full benefits of your on-site clinics? Or, are you just focused on meeting legislative requirements? There are three key things you can do to unlock the full potential of your on-site clinics. In a recent Worksite Medical Clinics Survey, employers with on-site clinics saw a return on investment (ROI) of 1.5 or higher. If you're not seeing similar returns, it may be because your on-site clinic isn't moving beyond basic requirements. Create a Patient-centered Clinic   Ensure the services offered by the clinic are suited to your employees. This will eliminate unnecessary spend on under-utilized services and steer you toward investments that will bring a greater sense of satisfaction, positive health outcomes for your employees and, consequently, a positive impact on your bottom line. Understand what your employee population looks like — in terms of age, gender and nature of work — as this will play a large role in understanding what type of health and social care services, as well as specialists, are needed. In addition to demographic information, it's critical to understand the health needs of your employees — for instance, which common illnesses are prevalent and need to be better managed and which key lifestyle risks need to be averted through education or preventative services. Communicate the Value   The adage of "if you build it, they will come" might not be the best way to yield the desired ROI in this case. It's important to shape communications around services offered on-site by highlighting the value they bring to employees: convenience and easy access to care, coordination and orientation toward quality providers, early detection of illnesses, etc. Effective communication will bring increased utilization and early detection, maximizing your investment as an employer while also contributing to the well-being of your employees. On-site Clinic: The Wellness Hub   When on-site clinics are designed and managed correctly, there's a high return for both employer and employee. Well-designed clinics can play a real gatekeeping role, coordinating employee pathways toward high quality providers and wellness vendors. They can also directly provide prevention and employee education services, which are key to avoid acute and costly care events. At Mercer, we help clients implement the 4-C model of effective on-site clinic management. This extends the value of your clinic from meeting legislative requirements to allowing employers to deliver quality health services that focus on value to the employee. To maximize your on-site clinic, reach out to us today.

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