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E C O N O M I C C O N S U L T A N T S. K M. March 26th, 2002. Compensation Awards and Real Returns. Presentation by Colm Mc Carthy DKM Economic Consultants. 1. Introduction. The Real Rate - 4% or 2.5%? What the Record Shows Index-Linked Yields

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  1. E C O N O M I C C O N S U L T A N T S K M March 26th, 2002 Compensation Awards and Real Returns Presentation by Colm Mc Carthy DKM Economic Consultants 1

  2. Introduction • The Real Rate - 4% or 2.5%? • What the Record Shows • Index-Linked Yields • The Ex-Ante Equity Premium

  3. Range Real Return on Equities Real Equity Premium over Bonds 6 – 7% 25 10 7 – 8% 20 21 8 – 9% 6 7 9 – 10% 4 7 10 – 11% 4 7 11 – 12% 1 2 12% + nil nil Total 120 120

  4. Continued…..

  5. Table 8: Real Yields on French Treasury Index-Linked Bonds Maturity Date Real Yield % 2009 3.48 3.68 2029 Source: Bloomberg

  6. Summary • Where Lies the Onus of Proof? • Long-Term Return as Low as 2.5% is Unprecedented • Index-Linked Have a Role in Prudent Portfolios • UK Situation Exceptional • Case for Structured Settlements

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