May 31
Over the years having worked in consulting and research I have been sent countless portfolios for opinion. Virtually all portfolios have followed a pre-defined asset allocation aligned to a specific risk profile but occasionally that is where the alignment ends. This is because the investments selected bear little to no relationship with their desired characteristics …
Mar 14
Diversification is one of the central tenets of investment management and fundamental beliefs across the global financial planning industry. Its validity was set in stone by Harry Markowitz in his PhD dissertation and 1952 Journal of Finance article, Portfolio Selection, which demonstrated the effects of combining uncorrelated assets … i.e. improvement in the portfolio’s return …
Aug 29
Background For quite a few years now, many commentators and researchers have criticized active strategies that charge active fees to receive benchmark-like returns. If a portfolio looks a lot like the benchmark it is trying to outperform, it doesn’t mean there won’t be outperformance, but after taking fees into consideration it is much more difficult. …
Aug 23
The following article was first published in the August Professional Planner magazine and can also be found on their website by clicking here … otherwise just read on … The management guru, Peter Drucker, is attributed with the phrase, “you can’t manage what you don’t measure” and whilst we know that is not completely true, …
Aug 17
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 …
Nov 14
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 …
Nov 07
We’ve all seen various developments in product design from hedge funds to long/short to real return approaches, and then there’s the increased focus on tactical and dynamic asset allocation. You would expect all of this to lead to different drivers of portfolio risk…i.e. away from traditional asset class drivers to market timing, investment selection, and …
Aug 26
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 …
Oct 07
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 …
Sep 27
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 …