The Active Management Channel

NewsLetter – April 2018

Read Harold Envensky's most recent Newsletter

Dan Fuss – Only Two Things Can Stop Rates from Rising

As his 60-year tenure attests, Dan Fuss is one of the most respected bond investors. In my interview with Fuss last week, he explained why it would take either a geopolitical crisis or an economic collapse to drive rates lower. Fuss also said investors should exercise caution in bond ETF markets that are exposed to liquidity shocks.

Second Quarter Hedge-Fund Strategy Outlook: K2 Advisors

In their second-quarter (Q2) 2018 outlook, K2 Advisors’ Research and Portfolio Construction teams share their views on why investors should not fear the return of market volatility—and why it may unlock opportunities for active managers. We believe offering these insights will help investors better understand the rationale for owning retail mutual funds that invest in hedge strategies.

America’s Weak Case Against China

The US Trade Representative appears to have made an ironclad case against China in the so-called Section 301 report issued on March 22. But the report – now widely viewed as evidence justifying the Trump administration's recent tariffs and other punitive measures against China – is wide of the mark in several key areas.

Mr. Market Grasps the Esoteric

We are reminded of Ben Graham’s Mr. Market analogy. In his analogy, the stock market is like having a business partner (Mr. Market) who offers to either buy or sell his half of the business to you, based on how the business is doing.

April 2018 Economic Outlook

Conditions we are seeing today are more normal than recent years, when investors grew accustomed to record low interest rates, a near-absence of inflation and the subdued volatility. We expect coordinated global economic expansion will continue through 2018, although improvements in some economic fundamentals may have peaked.

Yes. It's a Bubble. So What?

With sky-high valuations in the US stock market, and what we believe is a tech bubble that has dangerous implications for other areas of the market, we suggest four actions investors can take now to avoid the inevitable bursting of the bubble, and which will likely benefit their portfolios’ long-term performance potential.

World Markets Update

Three of eight indexes on our world watch list have posted gains through Monday, April 23, 2018. The top performer this year is France's CAC 40 with a gain of 2.37%. In second is India's BSE SENSEX with a gain of 1.89%. In third is Hong Kong's Hang Seng with a gain of 1.12%. Coming in last is Shanghai's SSE with a loss of 7.23%.

 

Do Equity Hedge Funds Really Generate Alpha?

Hedge funds, as represented by the Barclay index, can effectively be viewed as equity replacements. Further, the proper benchmark for equity hedge funds is target volatility strategies.

Volatility Is Back—And That’s a Good Thing for Active Management

It’s been a rocky start to 2018 for equity markets globally—volatility has returned with a bang and February saw the first 10% market correction in a while. So, why are active managers smiling?

Value Factor - Improving the Tax Efficiency

The tax efficiency of the Value factor can be improved by reducing exposure to dividend-yielding stocks. Improving the tax efficiency reduces the performance in Europe and Japan, but not in the US. Reducing turnover can be considered for minimising capital gains and stamp duty taxes.

Retirement Strategies in Pictures

Advisors providing retirement recommendations will find it helpful to use a graphical approach to show the year-by-year progression of funds available during retirement.

Why Introverts Have an Edge in Converting Prospects

It has been my experience that introverts have an innate advantage converting prospects, as compared to extroverts. I was curious to find out why – and what extroverts can do to overcome their disadvantage.

Commodities Are Flashing a Once-in-a-Generation Buy Signal

The investment case for commodities, gold and energy is more compelling than at any other time in recent memory.

Managing Volatility in Short‑term Markets: The Global Liquidity Ladder

In a storm, you want to be able to reach higher ground. Recent market volatility – sparked by concerns over interest rates, inflation, global trade, the tech sector and more – has many investors shifting toward more defensive portfolio positions.