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Thursday, 16 May 2013
Haruhiko Kuroda san's debut at the helm of the Bank of Japan (BOJ) shocked and awed financial markets for he delivered much more than ... Read more
Latest Investment Strategy News
Friday, 24 May 2013
Friday, 24 May 2013
Friday, 24 May 2013
Friday, 24 May 2013
Featured Paper
The question of whether an active or passive investment management approach adds more value to a portfolio has long been the source of vigorous debate in the investment community.
Debate on the subject ... The question of whether an active or passive investment management approach adds more value to a portfolio has long been the source of vigorous debate in the investment community.
Debate on the subject is intensifying, as a period of new challenges emerges for fixed income markets. The economic stability and low market volatility of the 1990s and early 2000s has given way to higher macroeconomic uncertainties – especially with regard to inflation, rising market volatility, concerns about sovereign default risk in some advanced economies and an increasing supply of government debt. The credibility of credit rating agencies has diminished.
In an environment where economic and investment trends may be prone to extreme fluctuations, a dynamic investment management approach that can help weather difficult markets and enhance the returns of a portfolio is more valuable than ever.
Perspectives
We show that a diversified basket of emerging market currencies has a significant correlation to global equity markets, while a similar basket of developed market currencies does not. We show that a diversified basket of emerging market currencies has a significant correlation to global equity markets, while a similar basket of developed market currencies does not.
Emotions and investor psychology can play a powerful role in driving share market returns and the sharp rebound in 2009 could see a return to ‘greed’, after two years of ‘fear’. Emotions and investor psychology can play a powerful role in driving share market returns and the sharp rebound in 2009 could see a return to ‘greed’, after two years of ‘fear’. In this paper, Robert Van Munster, head of Tyndall Equities, looks at two types of behaviour: ‘anchoring and adjustment’; and ‘aversion to ambiguity’. Both of these heuristics (or ‘rules of thumb’ often gained from trial and error) have a strong influence on investor behaviour and the choices they make and investors need to be aware of these in upturns as well as downturns, as they can lead to conservatism, disappointment and insufficient diversification. Van Munster writes that identifying and understanding these behaviours can not only assist with making more informed and rational decisions, but can also provide an edge over other investors. Many of these behaviours are, however, entrenched. Seeking independent financial advice and investing with a professional fund manager are steps investors can take to reduce the role these behaviours play in their decision-making process.
Alpha is shrinking, and it’s good news for investors. This idea may seem paradoxical. But alpha is really just the portion of a portfolio’s returns that cannot be explained by exposure to common ... Alpha is shrinking, and it’s good news for investors. This idea may seem paradoxical. But alpha is really just the portion of a portfolio’s returns that cannot be explained by exposure to common risk factors (betas). With the emergence of new betas, the unexplained portion (alpha) shrinks – alpha gets reclassified as beta. The rise of a group of risk factors we call hedge fund betas makes this transformation especially relevant today. Hedge fund betas are the common risk exposures shared by hedge fund managers pursuing similar strategies. We believe these risk factors can capture not just the fundamental insights of hedge funds, but also a meaningful portion of their returns.
Hedge fund betas are available for investment and can also be used to enhance portfolio construction and risk management. Ultimately, we believe the rise of hedge fund betas will lead not only to the reclassification of alpha, but also to better-diversified portfolios with greater transparency, improved risk control, and – perhaps most importantly – higher net returns.
The emergence of China may be the single most important event in Australia’s economic history. In coming years, China’s influence will shape Australia’s wealth but also how and where ... The emergence of China may be the single most important event in Australia’s economic history. In coming years, China’s influence will shape Australia’s wealth but also how and where we live. It will make us rich relative to much of the developed world but also raise social issues, particularly of fairness. As such, understanding China better through travel is crucial to determining how some of these issues may play out. For these reasons, James White travelled to China and had a closer look into its current economic environment, the impact of the large monetary and fiscal stimulus programs, the near-term outlook for growth and the nuances of Chinese commodity demand. The journey through central China, meanwhile, provided an insight into the country’s domestic economy. In particular, the city of Wuhan in central China did much to change the way White thinks of the country.
Property is typically used in a portfolio to add diversification and to provide a stream of regular income. However, as direct property is an illiquid asset class, many investors prefer to gain their property ... Property is typically used in a portfolio to add diversification and to provide a stream of regular income. However, as direct property is an illiquid asset class, many investors prefer to gain their property exposure via listed property securities, which provide liquidity.
Aspects
For the retail investor, structured products have not only weathered the GFC storm, but also become increasingly attractive in its aftermath. Among the benefits of structured investments are their capital ... For the retail investor, structured products have not only weathered the GFC storm, but also become increasingly attractive in its aftermath. Among the benefits of structured investments are their capital protection facilities (in some cases), their potential to earn higher yields than fixed deposits, and their use as a means to reduce market risk exposure.
They can also be designed to benefit from current market trends, linking them to the performance of a suite of benchmarks including interest rates, equity markets, commodities, corporate credit or foreign exchange markets.
Interest in structured products has grown as investors focus on capital preservation strategies and move away from inflexible products no longer relevant in an increasingly volatile investment environment.
More than half of European institutional investors are now utilising consultancy services. Environmental, social and governance (ESG) matters are a part of this trend as they begin to form a piece of the ... More than half of European institutional investors are now utilising consultancy services. Environmental, social and governance (ESG) matters are a part of this trend as they begin to form a piece of the investment consultants’ agenda due to growing investor demand, which is mostly driven by corporate pension funds, public pension funds and family offices and high net worth individual investors. This study shows that service development relating to responsible investment (RI) is a recent phenomenon among investment consultants but one that is rapidly growing. The survey uncovered the emergence of boutique firms that are focused completely on RI advice and found that service development will remain a key facet to monitor as it is unclear how newer or established firms will best respond to the growing demand for ESG advisory services. It also found that there are a few important barriers to address and hence push the ESG advisory market forward even faster than predicted today.
During extraordinary market conditions of all kinds – good and bad – it is usual to hear people say, “It’s different this time.” In this historical journey of economics, Gregory ... During extraordinary market conditions of all kinds – good and bad – it is usual to hear people say, “It’s different this time.” In this historical journey of economics, Gregory Curtis of US advisory firm Greycourt tries to uncover whether this time around, it really is different. Every market environment is different from every other market environment, but Curtis said what people are saying is that market conditions today are so exceptional, so completely unprecedented, that investors need to reassess everything they thought they knew about the investment process – or face serious consequences. We heard this during difficult environments like the Great Depression, 1974, 1987, 2002, and we’re hearing it again today. But it wasn’t different on any of those occasions as Curtis demonstrates that investors who kept their wits about them and continued to follow traditional, thoughtful investment strategies were well-rewarded in every case.
Instalment warrants facilitated geared investments by SMSFs in real property, including development activities as part of a ‘develop and hold’ strategy. However, on 26 May 2010, the Superannuation ... Instalment warrants facilitated geared investments by SMSFs in real property, including development activities as part of a ‘develop and hold’ strategy. However, on 26 May 2010, the Superannuation Industry (Supervision) Amendment Bill 2010 (“Bill”) was introduced into parliament proposing to amend the Superannuation Industry (Supervision) Act 1993 (“SIS Act”) in order to reduce perceived prudential risks relating to the use of instalment warrant arrangements. In this paper, James Meli of Binetter Vale Lawyers argues that if passed in its current form, the Bill will have major implications for instalment warrant arrangements and geared self-managed superannuation fund (“SMSF”) investments in real property specifically.
This paper examines the holdings data of various active funds in China to analyze their risk and style characteristics over the last five years. We show that fund managers were quick to increase their ... This paper examines the holdings data of various active funds in China to analyze their risk and style characteristics over the last five years. We show that fund managers were quick to increase their equity exposure at the beginning of the bull market, and they started to cut their equity exposure before the 2007-2008 bear market arrived. In terms of style, we find that funds had tilts toward momentum and small caps, but away from value.
Historically over the long term, index funds have performed favourably in relation to actively managed funds. This outperformance is a result of indexing’s low cost, broad diversification, minimal ... Historically over the long term, index funds have performed favourably in relation to actively managed funds. This outperformance is a result of indexing’s low cost, broad diversification, minimal cash drag, and potential for tax efficiency. In any market, these factors combine to represent a significant hurdle that an active manager must overcome just to break even with a low-cost index strategy over time.
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