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PortfolioConstruction Forum


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 Friday 08 May 2015

The independent professional development service for investment portfolio construction practitioners


Following on from Dr Woody Brock's warning in last week's Fodder that the 35-year equity market bull is over, this week's Fodder leads with Bill Gross, now at Janus Capital after 42 years with PIMCO, explaining his sense that the secular bull market is ending with a whimper, not a bang - and what that means for investing.

Obviously, Bill has a strong investment philosophy, something that's at the heart of what PortfolioConstruction Forum aims to foster in Members. This week Angela reviews two papers that show that managers (and practitioners, I'd argue) have a better chance of adding value if they have a clear and robust investment philosophy on how they believe they can generate it! 

For its latest "Undiscovered Fund", Zenith Investment Partners highlights a fund that plays to Bill's key point about the future of investing - an unconstrained strategy (in this case, aiming to generate absolute returns with less than half the volatility of global equities, irrespective of market conditions).

For those who are pondering the future of emerging markets - including the implications of a slowing China - Jeremy Lawson's excellent "Not another Emerging Market crisis" white paper shows that overall, another emerging market crisis is unlikely.

Finally, Tracey McNaughton's recent Markets Summit presentation precedes Bill Gross in arguing that

structurally lower interest rates will require more unconstrained debt investing and a greater focus on downside risk management.

All the best for some great (brave new investment world) learning! - Graham

P.S. Mark Your Diary!  PortfolioConstruction Forum Conference 2015 - 19/20 August.  "Between a rock and a hard place".  Registration opens soon.


A sense of an ending
I have a sense of an ending, a secular bull market ending with a whimper, not a bang. Only the timing is in doubt. Because of this sense, I have increasingly a great unrest. You should too.
Bill Gross, Janus Capital Group

The role of investment philosophy in evaluating managers
Managers have a better chance of adding alpha if they have a clear philosophy of how they generate it, according to research on the importance of an investment philosophy.
Angela Ashton, PortfolioConstruction Forum
| 1.50 CE

Undiscovered Fund: Active multi-asset/alternatives strategy
An actively managed, multi-asset/alternatives strategy that is positioned to generate absolute returns, with less than half the volatility of global equities, regardless of market conditions.
Zenith Investment Partners

Not another Emerging Market crisis
After a run of rapid improvement in living standards last decade, emerging markets will face a more challenging outlook - not a crisis - over the next few years.
J Lawson & N Jaquier, Standard Life Investments
| 2.00 CE
White Paper

Limbo lower - real rates are at a structurally lower level
Navigating the lower limbo stick will require more unconstrained investing, greater consideration of the chosen benchmark, and a greater focus on downside risk management.
Tracey McNaughton, UBS Global Asset Management
| 0.50 CE |

Member comments
Academy Autumn Seminar - Key takeout

China's CCP has the utmost determination to stay in power and they plan well into the future. Cracking down on corruption solves two issues - improving businesses practices and a chance to clean house of one's rivals.
Charlie Creswick, Ottomin Investment Group Comment

Academy Autumn Seminar -  Key takeout
Understanding an individual's time perspective can help us understand what motivates them and why they have certain biases. Among other things, it is a useful rapport building tool.
Vijay Srinivasan, Colonial First State


Why the 1981-2015 equity bull market will not be repeated
We are reminded daily that the US stock market has achieved record highs between 2009 and today. But the true bull market covers 35 years. What does an understanding it tell us about the future? The answer is: a lot.
Dr Woody Brock, SED
| 1.00 CE |

Size matters, if you control your junk
In recent years, academics have been at war over whether the small cap premium exists. This recent paper finds it does - if you control for quality - and that it is significant, and not time or market specific.
Angela Ashton, PortfolioConstruction Forum
| 2.00 CE

Should we focus on E/P instead?
Is it time to start thinking more about E/P ratios than P/E ratios? After all, predicting that returns may be higher or lower with a low (or high) earnings yield (and a corresponding P/E ratio) really isn't so controversial.
Michael Kitces, Pinnacle Advisory Group
White Paper

No one likes to pay taxes
In maintaining "no taxation, no representation" deal with its people, China's leadership appears to be going down a path that would see index funds as forced buyers of Chinese equities.
Louis-Vincent Gave, GaveKal

China equities: Is the rally sustainable?
A surprise rate cut in November 2014 and investor expectations of further easing measures have triggered a strong rally in China equities - both A shares, and in the last three weeks, H shares. Can it last?
Tai Hui, JP Morgan Asset Management

Member comments
Lower for longer

I agree with your thinking here Tim. I would add, that in addition to a slower growth in workers we have higher growth in retirees.
Aaron Minney

Academy Autumn Seminar - Key takeout
Avoiding investments in order not to support PETS concerns may not be conducive to maximising returns on investments, respecting client sensitivities to PETS can be very important in building long term client relationships. In my experiences with clients you really do have to "meet them where they live". I also like "clients don't care what you know until they know you care".
Jenny Atkinson, Xentinel Financial Services

Academy Autumn Seminar -  Key takeout
PETS can affect portfolios in many ways and their influences are very hard to quantify. While themes may be easy to provide commentary on, assessing whether they will materially impact on portfolios is the hard part.
Jonathan Costello, Australian Unity Personal Financial Services


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