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Aspects Articles
Investors Stake Future on Renewable Energy
Oil traders in New York don't often get a chance at world-wide fame. But for Richard Arens, a one-man band in the world of oil brokerage, it came at the beginning of this year. On the first Wednesday in January, financiers and governments across the globe watched anxiously as the price of oil edged towards the historic $100-a-barrel mark. Arens saw his opportunity and seized it.
The CFA Institute's Asset Manager Code of Professional Conduct
CFA Institute formed the CFA Centre for Financial Market Integrity (the "CFA Centre") to explicitly support the CFA Institute mission to lead the investment industry in setting the highest standards of ethics and professional conduct. Asset managers in particular hold a unique place of trust in the lives of millions of investors. Investment professionals and firms who undertake and perform their responsibilities with honesty and integrity are critical to maintaining investors' trust and confidence and upholding the client covenant of trust, loyalty, prudence, and care. CFA Institute and its members are committed to reinforcing those principles. To foster this culture of ethics and professionalism, the CFA Centre offers this voluntary code of conduct. It is designed to be broadly adopted within the industry as a template and guidepost for investors seeking managers that adhere to sound ethical practice.
The Equity Risk Premium and the Risks of Equity Investing
AXA Rosenberg has a 23 year history of valuing large universes of stocks using a fundamental approach and constructing portfolios using quantitative techniques. In this article, we set aside the role of active management in adding value above the market return and focus instead on the attraction of the global equity asset class as a whole for investors, particularly relative to long-dated bonds.
Portfolio Risk Analysis should Not Stop at Tracking Error
Active portfolio management is the art of balancing risk and return. In the absence of arbitrage, or inside information, an active manager must take on risk in order to achieve an excess return that compensates clients for the fees charged. The term "balance" insinuates that half of the art of portfolio construction lies in stock selection and the other half in risk management. It is therefore interesting to consider how one-sided the majority of fund management efforts are with regards the mix between research and portfolio construction. Despite recent trends to incorporate deeper risk understanding in the management of portfolios, the degree to which risk is actually viewed all too frequently comes down to little more than compliance adherence and tracking error recognition. In this paper we aim to demonstrate that this approach to portfolio risk management is a far from optimal as reliance upon tracking error as the primary, or worse, sole risk metric is subject to two key problems.
Fundamental Indexation: Revolutionary or Just Another Quant Value Strategy?
Most in the financial industry will recall the impact that the tech bubble had on the share market during the late nineties. Jeremy Siegel (2006) makes the point that in early May 2006 the price weighted Dow Jones Industrial Average index approached its all time high. Yet large cap weighted indexes - such as the S&P 500 or the Russell 3000 - in which most investors hold their indexed investments were still substantially below their peaks of March 2000. Siegel questions, "Whether there is a better way to capture the market's return without enduring the wild swings that characterised the last bubble." He then goes on to state that "we are on the verge of a revolution: new research demonstrates that it is possible to construct broad-based indexes offering investors better returns and lower volatility than capitalisation-weighted indexes."
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