The S&P 500 index is arguably the most well-known worldwide. It is based on the market cap of the 500 largest companies in the U.S. The first-ever ETF, introduced in 1989, hoped to mimic the index, but was short-lived due to a lawsuit. Several S&P 500 ETFs have been brought to market since, and we show their performance, as well as the tracking error relative to the S&P 500 Total Return Index (which assumes reinvestment of dividends).
Data mining is a huge risk with factor-based investment strategies. Many factors have proven to not work in practice. Even the most popular factors, like value and momentum, may prove less effective going forward.
Passive investing has been ridiculed by Wall Street for decades. The common theme is that indexing has become such a force that the market’s price discovery function is no longer working properly. Given the number of questions I get about this issue, one would think that passive investing is now dominating markets.
We believe the myriad inefficiencies in emerging market fixed income play to the strengths of 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?
Combining active and passive investments can be a sound strategy. But some advisors use imperfect portfolio construction techniques. Here is a four-step process for selecting actively managed funds that will complement a passive portfolio.
Viewing investors and markets as emotional decision makers rather than as rational computational entities forces us to reconsider every aspect of how we operate in financial markets. The behavioral financial markets concepts I discuss below provide a framework for rethinking client financial planning, asset allocation, investment manager selection and the creation and execution of investment strategies.
Passive equity strategies have seen massive inflows over the last decade, in part owing to active management’s struggles. But a closer look at the story within the story suggests that leaving active out of the equation could be leaving money on the table.
Assessing our portfolios’ performance is a necessary activity, but by being aware that measurement over shorter time horizons is dominated by noise, we can better resist the natural human instinct to “do something”—typically selling the underperforming investment at exactly the wrong time—if near-term performance falls below expectations.
Matt Freund, Co-CIO, Head of Fixed Income Strategies, Senior Co-Portfolio Manager, discusses what sets the Calamos fixed income approach apart. To learn more visit: http://bit.ly/AskPM-FI