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PortfolioConstruction Forum

 

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 Friday 28 March 2014

The independent professional development service for investment portfolio construction practitioners

G'day

It's a bit of a provocative Forum Fodder this week. Tim Farrelly argues that as alternative assets begin to be popular, performance dwindles i.e. there is no safety in numbers. Yale's Robert Shiller (2013 Nobel laureate in economic sciences) describes his recent meeting with Prime Minister Shinzo Abe, and the importance of "stories" in understanding why the global economic recovery has remained weak since 2009 - except for Japan, which he attributes to confidence in Japan's "story". Michael Edesess reviews Fama and French's latest paper on a five-factor asset pricing model, concluding it's "too opaque to allow thorough independent analysis or confirmation" so as to be of any use to advisers or investors. Fama as you know, shared the 2013 Nobel Prize in Economic Sciences, with Shiller - so it's a brave man who criticises his work! We also highlight Ron Temple's "The wrong route to the right destination?" presentation from Markets Summit. It missed out by only the slimmest of margin (0.01%) on receiving the Delegates' Pick Award (behind Hamish Douglass). Ron's and Hamish's views are diametrically opposed and yet equal numbers of delegates agreed with both arguments on the day.

"Attend" them and decide for yourself who you agree with. Finally, Sean Henaghan and his colleagues from AMP Capital argue that a different approach is needed to monitor the success of target date funds.
As always, all the best for a great weekend's learning and week ahead - Graham
P.S. If you have a view on any of this, use the Comments area to express it!

LATEST...

Safety in numbers?
When any investment and, in particular, an alternative investment begins to be considered mainstream with attendant big inflows, the end is generally nigh.
Tim Farrelly, farrelly's
Opinion

The global economy's tale risks
Just as it is hard to make a blockbuster film every time, no leader can consistently shape the narratives that affect the economy. But they need to try.
Robert J. Shiller, Yale University
Opinion

The takeaways from the latest Fama-French research
Does Fama and French's latest work, A Five-Factor Asset Pricing Model, provide any information that can be of practical value to advisers or investors? The answer is no.
Michael Edesess, Fair Advisors
Opinion

The wrong route to the right destination?
We must question common assumptions about the US and emerging markets to ensure we are focusing on the best routes to the right destination.
Ronald Temple, Lazard Asset Management
Resources
* Second highest rated session of the Markets Summit 2014 program

Monitoring the success of target date funds
The dynamic nature of target date funds - encompassing multiple objectives and changing asset allocations over time - raises challenges for performance reporting.
Sean Henaghan, AMP Capital Investors
White paper

Other good reads
Did Hyman Minsky find the secret behind financial crashes? Minsky spent his life on the margins of economics but his ideas gained currency with the 2007-08 financial crisis. The great divide over market efficiency - Cliff Asness & John Liew attempt to reconcile the Nobel committee's decision to split the baby that is the prize in economic sciences.

RECENTLY...

Heading for the exit
The Fed's clear message from yesterday's FOMC meeting is that it will stay the course on exiting QE as gracefully and slowly as possible.
Dr Robert Gay, Fenwick Advisers
Opinion

Malthus, Marx, and Modern Growth
Will each future generation continue to enjoy a better quality of life than its immediate predecessor? It's likely, but the risks seem higher than a few decades ago.
Kenneth Rogoff, Harvard University
1 commentOpinion

Thoughts on investing - scale and skill in active management
It's the eternal debate - can active management outperform? Two recent reports - one from Warren Buffett, the other academic - offer some interesting insights.
Angela Ashton, PortfolioConstruction Forum
Research

How much do clients withdraw in retirement, really?
As the logic goes, retired clients deplete their portfolios and pass away as the years go by, so a firm with aging clients is akin to a rapidly depreciating asset. Is this true?
Michael Kitces, Pinnacle Advisory Group
Opinion

Why the US recovery will surprise on the upside
There are sign-posts that clearly suggest the US is ready to surprise on the upside, with significant implications for portfolios.
Hamish Douglass, Magellan Financial Group
Resources
* Awarded Delegates' Pick Award for Best Markets Summit 2014 Presentation

A year for genuine improvement
2014 is likely to be a year of genuine improvement in the global economy, and one where uncertainty is rather low.
Christopher Probyn, State Street Global Advisors
Opinion

PLUS...

Markets Summit 2014 - The Great Escape - Resources Kit online
The most successful
Markets Summit program yet (97% of delegates rating it good (42%) or excellent (55%)), the 2014 program featured a stellar line-up of international and local geopolitical specialists, economists, market/asset class experts, and investment strategists. Each offered a high conviction idea regarding the impact of Unconventional Monetary Policy on the medium-term outlook for the global economy, key market or asset class - and, of course, the implications for portfolios.
Access a baker's dozen of expert, high conviction insights to consider applying when building portfolios.

Mark Your Diary: PortfolioConstruction Forum Conference (19-21 Aug)
Since 2002, PortfolioConstruction Forum Conference has gained a reputation as THE investment conference of the year. Presented in Sydney each August, it is our flagship program - a jam-packed, marathon three-day, 25-hour program featuring 40 intensive, objective, interactive sessions and more than 50 carefully selected local and international portfolio construction experts. It is a companion program to the annual Markets Summit held in Sydney each February.
Preview the theme "Reconnecting the three Rs - Risk & Return (& Relating)"

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