My firm, AthenaInvest, has conducted extensive research on the use of behavioral factors to estimate expected returns and, in turn, to make market-rotation and beta-exposure investment decisions. The following article outlines our behavioral approach and compares the results to a passive benchmark.
Here are the top five red flags – and lessons – that more seasoned investors should have seen and that average investors should learn from the Bernie Madoff scandal.
Who is better at value investing: robots or people? How have robots – the quantitatively-driven passive funds that hold, for example, low price-to-book stocks – fared against actively managed value mutual funds?
Surprising no one, President Donald Trump announced his decision to withdraw the U.S. from the Paris climate agreement this week, highlighting the depth of his commitment to keep “America First.” Also surprising no one, the media is making much of the fact that the U.S. now joins only Nicaragua and Syria in refusing to participate in the accord.
Investors interested in long/short equity mutual funds would be well advised to consider more than their much-more competitive fees vs. private hedge fund peers. To genuinely hedge the long components of a portfolio, look for lower net long exposures in a long/short equity allocation, and added value on the short side even in rising equity markets.
Last week I discussed what I think will be the fallout from the Great Reset, when the massive amounts of global (and especially government) debt and the bubble in government promises will have to be dealt with. I think we’ll see a period of great volatility in the markets. I offered a solution for dealing with this complexity and uncertainty in the markets by diversifying trading strategies. But that diversification must reflect a rethinking of Modern Portfolio Theory, including a significant reshaping of valuations in asset classes. We’ll deal with those topics today.
Speaking two weeks after his 88th birthday, Jack Bogle called the fiduciary rule “silly” and said that financial advisors’ fees are heading lower. Indeed, he said, advisors are destined to charge hourly or retainer fees, like lawyers and accountants.
Investors are clearly shifting away from actively managed funds to those based on index strategies. Only time will tell, but this has the look of a durable, secular change in investment management. But much of the perceived threat to market stability of indexing is overblown.
Brazil’s stocks and currency took a beating as President Temer was implicated in a corruption scandal, endangering the government’s reform agenda and fragile economic recovery.
Today’s indexing mania is driving the marketing people at the best active fund complexes completely crazy, but the top portfolio managers – that is, the people who really, truly enjoy investing – are seeing a lot of new opportunities.
You are my friends and clients. I have great respect for the work you do and appreciate the value you add to the lives of your clients. That’s why it’s painful for me to see so many of you headed for trouble by denying the obvious trend in fee compression.
Robert DiMella is an executive managing director and co-head of MacKay Municipal Managers team, overseeing approximately $20 billion in municipal bond assets. In this interview, he discusses the opportunities for muni bond investors and the outlook for the coming year.
This letter will cover the philosophical underpinnings of my thinking. I’ll also introduce some investment tools (which I will give you access to through a link later on in the letter) that express that philosophy, but you could also design a different answer that fits your own (or your client’s) portfolio construction.
Last year, the Federal Register—the U.S. government’s depository of rules and regulations—hit an all-time high of 81,640 pages. Among the industries that bear the greatest regulatory oversight is financials, which has seen a disproportionate amount of scrutiny in recent years, especially following the 9/11 attacks and subprime mortgage crisis.
K2 Advisors’ Founding Managing Director David Saunders is speaking at the prestigious SALT conference this month in Las Vegas, where he’ll discuss the liquid alternatives landscape and why he thinks now’s the time for investors to consider this asset class.
Harold Evensky's newsletter to his readers.
Political pressure on the chaebol is poised to rise, but corporate governance efforts already underway and end-market demand have proven tailwinds that have so far trumped politics.
Socially responsible investing (SRI) has captured nearly a quarter of U.S.-based assets. New evidence from one of the world’s largest sovereign wealth funds shows that those investors are sacrificing significant performance. Indeed, they are giving up more than 1% a year – effectively doubling the typical 1% AUM advisory fee.
A review of last month’s market-moving events across countries and asset classes.
Driverless cars may be the wave of the future. But when it comes to bond investing, it’s best to keep your hands on the wheel. Anything less could do serious damage to your fixed-income portfolio.
In this Q&A, Thornburg’s Connor Browne doubts the Senate will pass the House’s American Health Care Act (AHCA) in its current form, and is cautious that the status quo may even prevail.
With markets seeking to avoid similar toe-stubbing in the policy arena, we examine the drivers of the fixed income markets for the near term. In doing so, we consider President Trump’s fiscal policy influence, Janet Yellen’s monetary policy impacts and evolving exogenous geopolitical dynamics. So, who or what will determine the market’s course moving forward?
DALBAR’s report is commonly cited as “proof” that mutual fund investors have historically made poor market-timing decisions. While DALBAR does not publicly disclose its approach, in this article I use a transparent and industry-accepted methodology, based on publicly available data, to demonstrate that investors’ returns have not been nearly as bad as DALBAR claims.
It is unfortunate that Blanchett’s article misses the central point that the Quantitative Analysis of Investor Behavior (“QAIB”) measures the mutual fund investor experience and not the areas raised as concerns. In fact, the author admits by his ignorance of its contents that he has not read the report that he so roundly criticizes.
In the last 20 years, the U.S. stock market has undergone an alarming change that too few people are aware of or talking about. Between 1996 and 2016, the number of listed companies fell by half, from 7,300 to 3,600, according to a recent report by Credit Suisse. This occurred despite the U.S. economy growing nearly 60 percent over the same period.
When it comes to credit investing, we believe passive investors are implementing a suboptimal strategy and may be leaving money on the table as active management offers several potential advantages.
Fixed-income closed-end funds (CEFs) should perform poorly when the yield curve flattens, according to Jeffrey Gundlach, because those funds borrow short and lend long. But DoubleLine’s CEFs have more than withstood the flattening of the yield curve over the last six years.
Political risk may have ratcheted lower after the first round of the French presidential election. But the latest jump in asset prices across Europe appears to have tailwinds well beyond politics.
While there was plenty of ink spilled and electrons fired regarding the White House tax reform proposal last week, it could be a very long time before anything actually gets voted on. And who knows if it will even be passed.
if you are overcome with fear of missing out on the next stock market move; if you feel like you have to own stocks no matter the cost; if you tell yourself, “Stocks are expensive, but I am a long-term investor”; then consider this article a public service announcement written just for you.
It took nearly 66 years for Jack Bogle’s embrace of the index fund to become the dominant trend in the mutual fund industry. In the wake of that dominance, the rest of the industry faces a painful decline, according to Bogle. His thesis can be applied to a key group of fiduciary advisors – those that are part of a “roll-up” entity – whose business models are flawed in the same way as those doomed fund companies.
Emerging markets have shot out of the gate in early 2017, even as the Fed is hiking rates. Renewed global growth, earnings cycle and valuations bode well.
Trump’s 100th day arrives next Sunday, April 29, and it would be disingenuous to describe his tenure so far as smooth sailing. He’s faced a number of significant setbacks and distractions, including federal judges’ smackdown of his two travel bans, a failure to repeal and replace Obamacare and an ongoing investigation into his administration’s possible collusion with the Russian government in the months leading up to the November election.
With over 30,000 individual issuers and one million distinct securities, the supply of municipal bonds is highly fragmented.
The popularity of smart-beta products has raised concerns that certain factors have been “overgrazed” – that their expected return has been driven down due to popularity-driven demand. A new research paper purports to refute this concern. But its logic is flawed and practitioners should be highly skeptical of its conclusions.
ETFs can have significant costs that aren’t entirely evident in expense ratios. From transaction to holding costs to ETF composition, the total costs of ETFs can be a significant drag on returns, which are coming under the microscope, as are the robo-advisors that typically use them.
In their second-quarter (Q2) 2017 outlook, K2 Advisors’ Research and Portfolio Construction teams share the key market events they have an eye on.
In 2016, Research Affiliates published a series of articles challenging the “smart beta” revolution. We pointed out that, while there is merit in many factor tilt and smart beta strategies, performance chasing in these strategies—buying the popular outperforming strategies whose relative valuations are at extremely high levels—can be just as dangerous as performance chasing in other realms of asset management.
As the Fed raises rates and suggests it may start shrinking its balance sheet later this year, managing duration risk becomes much less straight forward.
The first quarter of 2017 was a profitable one for many strategic domestic and global equity investors. All major domestic large cap indices are up for the year: S&P 500 is 5.53%, Dow 4.56%, and NASDAQ 9.82%. On the other hand, domestic small cap underperformed with the Russell 2000 gaining 2.12%.
While it might sound obvious, we find it important to remember that knowing about the past only helps you place bets on the future to the extent that the future is like the past.
So should we sing or weep? Warren Buffett has a brilliant way of making the complicated simple. Let’s think about valuations like we think about the price of hamburgers and see if we are going to get more or less for our money. Today, I share with you my favorite valuation charts and story them in a way I hope your clients might better understand.
My firm recently approved a new alternative investment, one that until recently was only available through hedge funds, the Stone Ridge Reinsurance Risk Premium Interval Fund (SRRIX).
Yes, active management has had its collective head beaten bloody for the past few years; and the proclivity for passive investing may persist a lot longer than any of us imagine, driving markets higher than many of us believe possible; but I think the stampede into passive investment is going to end up painfully, at the bottom of a cliff, for many investors.
US indices made their all-time high in early March; aside from the Nasdaq, which made new highs this week, these indices have since moved sideways. SPX has alternated up and down 5 weeks in a row, producing little net gain. Seasonality is particularly strong in April, so a fuller retest of the March highs might still be ahead this month. And indications that 2017 will be a good year for equities continue to add up. But there is a notable set up in place for the first correction since November to trigger. This week is likely to be pivotal.
In case you haven’t already noticed, inflation has been steadily creeping up since July. In February, the most recent month of available data, consumer prices advanced at their fastest pace in five years, hitting 2.7 percent year-over-year.
Many investors still have misconceptions about exchange-traded funds (ETFs), including the type of market exposure they are getting with traditional capitalization-weighted ETFs. Dr. Chandra Seethamraju, director of systematic modeling, Franklin Templeton Solutions, gives us the lowdown on the concept of “beta” within ETFs—specifically strategic beta—and how it can offer a smarter investment approach.
Headline CPI rose from 2.5% to 2.74% last month, fueling speculation about higher interest rates. But inflation readings will be lower in the next few months, according to Jeffrey Gundlach.
