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Another Lost Year for Active Management
by Chris Maxey, Ryan Davis of Fortigent,
There is no doubt that 2012 will be remembered by many investors, for reasons both good and otherwise. One group less likely to remember the good of 2012 is active managers. Across the universe of hedge funds and mutual funds, relatively few were able to outperform their comparative benchmarks. This continues a long running trend of active managers lagging their less active counterparts and raises many questions about the efficacy of active management.
An Unconstrained Approach to Bond Market Investing
by Sabrina Callin, Lisa Kim of PIMCO,
Investors are increasingly focused on alternatives to traditional investment strategies. Unconstrained bond portfolio construction should be driven by an outcome-oriented goal, with strategies assessed on an individual risk/reward and correlation basis, and each investment in the portfolio evaluated rigorously for the expected risk and return as well as the potential impact of the correlation to other investments in the portfolio.
Taking Care of Business, DC-Style, to Avert the Fiscal Cliff
by Liz Ann Sonders of Charles Schwab,
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
Getting the Most from Your Investment Committee
by Bob Veres,
Investment committees are a little bit like fingerprints: they come in all shapes and sizes, and no two are exactly alike in form or function. So advisory firms that have investment committees ? or are considering creating one ? can learn a lot from one another. My research has identified some best practices for this flexible management tool, by comparing notes among advisors on how they are managing their IC teams.
A Face-Off Between Passive and Active Investing
Exchange-traded funds continued to attract assets in 2012 while money has been exiting mutual funds. Still a majority of assets continue to be invested in actively managed products: As of the end of 2011, of the nearly $13 trillion invested in funds, index and exchange-traded funds comprise only about 8 percent, according to the Investment Company Institute.
The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase)
by Wade Pfau,
In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.
Nate Silver's Message for Financial Advisors
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc
by Wade Pfau,
Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.
The Downside to Socially Responsible Investing
by Robert Huebscher,
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
Emerging Markets: Maintaining Perspective
by Robert O. Abad,
In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.
Asset Location: Nine Tips to Create ?Tax Alpha?
by Glenn Frank,
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead ? however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets ? in taxable or tax-sheltered accounts.
The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase
by Wade Pfau,
Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.
Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick
by Bob Veres,
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
Waiting for Treasuries to Reverse Course
by Chris Maxey, Ryan Davis of Fortigent,
In the years since the global financial crisis, investors have funneled money into fixed income securities. This year alone, more than $260 billion found its way into fixed income mutual funds. In an environment desperate for yield-oriented solutions, such demand is not surprising. What might be considered surprising, however, is investors' willingness to embrace such yield with extraordinary risk attached.
How to Change the Regulatory Debate - Before it's Too Late
by Bob Veres,
After almost a decade of lobbying, arguing, and posturing, the long fight on Capitol Hill over who will regulate RIAs and how to define 'fiduciary' is approaching a close. Within the next six months, there will no longer be any real excuse to put off a decision, and new players, both in Congress and at the SEC, will be eager to start fresh.
ETFs for Tax Planning
Exchange-traded funds are often regarded as more tax-efficient than traditional mutual funds largely due to the fact that many ETFs have been able to avoid the annual capital gains distributions that often frustrate investors in traditional mutual funds. As we progress toward the end of another tax year, many investment advisors are also finding ETFs to be effective tools for tax planning purposes.
Is Gluskin's David Rosenberg Right about Utilities?
by Geoff Considine,
They're not the sexiest property on the Monopoly board, but in today's market, there's plenty of evidence mounting that utilities are a great source of income. Indeed, Gluskin Sheff's David Rosenberg made the case for utilities in a recent commentary.
The Yin and Yang of 2012 Stock Markets Through September
by Ron Surz,
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
How to Build a Portfolio
by Adams Jared Apt,
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
Jim Bianco ? Markets Will Benefit From Disastrous Fed Policy
by Robert Huebscher,
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
The Future Of Money Market Funds
The Financial Crisis of 2008 has left its mark on the capital markets and the economy, and money market mutual funds are one of those areas that were affected. One of the pieces of unfinished business following the financial crisis is improved regulation of money market mutual funds.
Can Our Retirement System be Fixed?
by Robert Huebscher,
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
Who Benefits from High-Speed Trading?
by Michael Edesess,
Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?
The Game-Changer for Attracting Affluent Clients
by Dan Richards,
Until now I've been a skeptic on the value of social media for attracting affluent clients. You can use Facebook and Twitter to connect with investors in their 20's and 30's - but not the older, more prosperous clients advisors target. But last week, three separate conversations changed my mind on this.
High Yield and Low Risk: Finding the Best Closed-End Funds
by Geoff Considine,
Yield-starved investors have ventured into exotic - and often risky - assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.
Impact of ETF Growth on Active Managers
A paradigm shift away from active management has been in place for more than a decade. Active mutual funds held more than 19 times the amount of assets than passive strategies before the SPDR SPY ETF was launched in 1993. As seen below, they have gradually lost market share to passive vehicles, particularly in US Equities.
Advisor Perspectives Marketing Case Study: A Small Fund with Large Ambitions
by Team,
For many smaller investment firms, growing a fund?s assets can be an enormous challenge, typically constrained by labor-intensive lead generation and qualification processes, lengthy sales cycles, and limited resources. One Boston-based firm found a way to eliminate these bottlenecks?and nearly double their assets as a result.
Why Are Advisory Fees Lower Than They Have To Be?
by Bob Veres,
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
Finding the Best Dividend Fund
by Geoff Considine,
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
The Father of Efficient Markets: Is Warren Buffett Smart or Lucky?
by Dan Richards,
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
Alternative Mutual Funds See Continued Growth
During an especially difficult week, global equity markets were deep in the red, as the S&P 500 Index lost 3.2% and the Dow Jones Industrial Average fell 3.3%. There was no shortage of disappointing data during the course of the past week, ranging from weakness in the ISM manufacturing survey to an underwhelming May labor market report. It was such a bad week, in fact, that Bespoke Investment Group found that 18 of the 21 economic indicators released in the U.S. fell short of expectations.
The Bargains in Europe's Great Oversell
by Bob Veres,
When was the last time we saw negative headlines drive valuations as low as they
have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager
of the Mutual European Fund, says this period of obsession with Greek debt, bank
restructuring and single-digit P/Es may be known as The Great Oversell.
What the Individual and Professional Investors are doing
The tug of war between individual investors and investment professionals is seeing two distinct paths. According to reports from the Investment Company Institute, equity outflows of mutual funds in April were at $18 billion, the most in nearly 28 years. On the other side, according to Bloomberg, the Commodity Futures Trading Commission showed the drastic reduction of bearishness by professional speculators as net short contracts have dropped over 80% since the high set last September. The question is, Who will be right and when?
Richard Bernstein: US Assets will Outperform over the Next Decade
by Robert Huebscher,
Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.
Why a 60/40 Portfolio isn?t Diversified
by Alex Shahidi,
Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.
Bond Investors Beware: Quicksand Ahead
There is a potential danger out there lurking for bond investors who are anxious for interest rates to increase. That danger for these yield-seekers is getting stuck in a bond mutual fund that might never deliver an investor the opportunity to realize the return of their capital. Bond mutual funds have been the beneficiary of a huge outflow of funds from the equity markets in 2011. The trend continued through the first quarter of 2012 even as equity markets turned in one of the best quarterly performances in a decade.
Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
The Gutenberg Economy
by Michael Lewitt,
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
Why Equities Are Attractive Today
by Matthew OConnor of Hartland & Co.,
Is today the right time to invest in equities? Equity investors have experienced a roller-coaster ride. As a result, many investors have run as far as they can from equities, pulling out roughly $135 billion from U.S. stock mutual funds last year. Even with the S&P 500 Index off to its best start in 25 years and inching closer to its 2008 high*, investors continue to withdraw money from U.S. stock mutual funds. So, where are we? Is it the right time to invest in equities? Due to a combination of reasons, we believe equities do look particularly attractive today and for the long term.
Why Invest? - Part 2
by Adam Jared Apt,
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
Cures for the Apathetic Investor
A lack of faith and trust has driven investors to the sidelines and halted the flow of capital in the U.S. According to the Investment Company Institute, investors pulled more than $130 billion from equity mutual funds during 2011. This is a common reaction in the cycle of market emotions where investors generally move from a fear of losing money, to becoming apathetic about the markets, to feeling confident about investments, and finally, to irrational exuberance. Right now, many investors appear to be stuck in an apathy sandpit.
Weekly Market Update: Introduction to Alternative Investments
by Team of American Century Investments,
Alternative investments (or alts as they are commonly known) have exploded in popularity in recent years. What began as specialty investment strategies utilized by only the most sophisticated institutional investorssuch as pension plans and university endowmentsare now readily available to retail investors through a number of mutual funds and exchange-traded funds. Here we try to explain alts appeal in broad terms, discussing how these strategies are used and what role alts may play in an individual investors portfolio.
2011 A Difficult Year for Active Investors
by Owen Murray of Horizon Advisors,
Actively managed mutual funds greatly underperformed their respective benchmarks in 2011. This was primarily due to extreme market conditions triggered by the European debt crisis. Investment managers were not rewarded for good fundamental decision making as fear dominated trading activity in the global markets. Active manager underperformance / outperformance trends tend to be cyclical, but over time, good active managers add value. We expect actively managed funds to outperform once market volatility subsides and fundamental factors reemerge as a key consideration for investors.
Results 3,151–3,200
of 3,332 found.
