Category Archive: Managed Funds

Aug 17

Look for the Signal amongst the Noise

Background When disappointing performance occurs, alarm bells will typically ring in the minds of investors, advisers, asset consultants and perhaps the managers themselves. Investing has only ever been a long game but thanks to the internet, the 24-hour news cycle, social media, etc. etc., it appears that success is expected to occur quickly and this …

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Nov 14

Does higher non-market risk produce higher alpha?…and the possible introduction of the Furey Ratio

Background There’s a widely held belief that to create alpha (i.e. positive returns after adjusting for risk…let’s say market risk), a manager needs to make meaningful bets away from the market. That is, stop being a “benchmark hugger”, concentrate the portfolio with best ideas, and/or move the portfolio holdings away from the benchmark and possibly …

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Sep 20

A widely accepted portfolio construction flaw

The typical approach to portfolio construction in the world of financial planning is a 2-step process (of course, this is after the desired risk and return characteristics are settled). The first step is setting asset allocation and the second is investment selection where most of the industry chooses to select from a variety of managed fund strategies. …

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Aug 26

Real Return funds…lacking real-ity?

What a fascinating investment world its been over the past few months. We’ve had concerns about Greece exiting the Euro, commodity price crashes, a Chinese sharemarket crash and now some of the biggest developed economy sharemarket declines since the dark days of the GFC. Volatility has been somewhat benign for a long time thanks to …

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Oct 07

SPIVA Report…strong evidence supporting active management in small caps…not much else

My favourite simple performance report on active management came out today on the Australian market…it can be downloaded by clicking here. Unfortunately active management for the broad asset classes once again came up looking poor with an overwhelming proportion failing to outperform broad indices for Australian Shares, International Shares, Australian REITs, and Australian Bonds. An enormous …

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Sep 27

Bill Gross leaves PIMCO…might lead to a downgrade or two

Irrespective of the quality of the rest of the firm, and there is a lot of quality, with the departure of Mohammed El Erian at the start of the year and now Bill Gross, it doesn’t take much to guess there may be a little destabilisation at the PIMCO offices for a while. Whilst Bill …

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Jun 14

Market Cap Weighted Bond Indices…always tough to beat

The common criticism of market-cap weighted bond indices is that they are inefficient because they are obviously weighted towards those with the most debt. Thus indicating that the index potentially carries more risk than necessary, or than we may want in a portfolio, because those with the most debt carry greater default risk than those with very …

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May 05

Revisiting Asset Weighted Returns and the Lifecycle Fund

Given the start of MySuper this year, superannuation trustees have released numerous lifecycle funds to satisfy this new legislation. Whilst lifecycle funds have been popular among superannuation trustees, the investment and adviser community haven’t been so complimentary. Either way, lifecycle funds definitely have a place in the investment landscape and they provide an approach to …

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Apr 24

Absolute return investing…a nice goal but disappointment is likely

Absolute return investing, according to many definitions, is about getting positive returns irrespective of the overlying “market” return of whatever asset class the investor is being exposed to. This essentially means that any “absolute” returning investment needs to employ strategies that are independent of market direction. For example, if the market (and it can be …

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Mar 25

Mortgage Funds…still on the nose to me…but perhaps for different reasons than others

Over the last 12 months I’ve increasingly had inquiries about investing in mortgage funds. During the GFC, pretty much all liquid mortgage funds froze their investor’s funds so access was only available in periodic dribs and drabs and for many this process is still playing out. However, there are some new funds which have raised …

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