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Friday 01 April 2016

Specialist, independent investment continuing education & certification for portfolio construction practitioners

Have your say
When I moved to Australia in the 1990s, I was often struck by how ready Australians were to question anyone who set themselves up as an expert - healthy scepticism seemed to be a national trait. Which is why it's always struck me as odd that so few Members question the views of our Faculty each week. But not so over the past two weeks - it's been great to see Tim's and Michael's articles on sequencing risk stirring up a storm of comment from Members challenging their reasoning and conclusions. It's what makes this a "Forum". On a related note, we received a lot of questions from delegates at Markets Summit for the Faculty, and we've now posted our pick of the questions and the Faculty has begun to answer them. You'll find the Q&A on the session microsites in the Markets Summit 2016 Resources Kit. As well as earning CE from "attending" the sessions online, you can add your own questions for the Faculty to (you'll get an automatic notification when you've been answered).
the best for a great weekend's continuing education - Graham
P.S. We've seen some great April Fools jokes today. Here's my pick.


A global (quant) perspective on the Australian equities
One might expect that Australia's high dividend yield, currently lower PE Ratio and generally smaller companies means the Australian equity market behaves like a global small cap with a value style tilt. Is that true?
Michael Furey, Delta Research & Advisory 0.25 CE  Research

The Fed’s New Neutral rate
No one expected the FOMC to change its policy rate from 0.25% to 0.50% this month - but this month's meeting still provided plenty of unusual twists that warrant serious thought.
Dr Robert Gay, Fenwick Advisers

When things fall apart
The economic theories of the pre-crisis period – rational expectations, efficient markets, the neutrality of money – must be revised. Politicians must encourage a revolution in economic thinking.
Anatole Kaletsky, GaveKal

It’s the end of EU-rope as we know it
The EU has been in crisis for many years. But you ain't seen nothing yet. 2016 will change the nature of the EU and it might well signify deja-vu, the end of Europe's process of political and economic integration.
Oliver Hartwich, The New Zealand Initiative 0.50 CE  |
1 comment | Resources
* Rated in the top 5 presentations by Markets Summit 2016 delegates

Capturing the governance premium in less developed markets
In the last 10 years, many companies from emerging economies have closed the corporate governance gap relative to their developed market counterparts. Such companies find themselves in a sweet spot.
Mugunthan Siva, India Avenue Investment Management Opinion

Member comments
Prolonged low returns
Tim, your point about the prolonged period of low returns is bang on the money but your implicit solution to stay 100% invested in a volatile market does not stand the test...
Aaron Minney
, Challenger Comment

You are correct but...
Unfortunately, the historic examples of sequencing risk at its worst has always been during the most volatile of equity markets...
Michael Furey
, Delta Research & Advisory Comment

S&P/ASX 200
I'd like to see this scenario run with the 40% one year dip replaced with the actual S&P/ASX 200 returns starting just prior to the GFC...
Brendan Swift, Collaborative Media & Publishing

The question is how...?
... how much pain will be endured to bring global debt back down to normal levels?  Are talking a Great Depression type proportion or a more gradual reduction over, say, 10 or 20 years?
Stuart Bailey
, KAS Financial Advisers Comment

Long-term returns
I strongly disagree Michael. I enjoy and appreciate your work on long-term investment matters but I believe you have inputted unrealistic expectations and then come to a poor conclusion.
Mark Hayden, Hayden Financial Services

Fasten your seatbelt for a volatile 2016
Thanks, some great questions here – I appreciate the opportunity to respond. 1. If the best case is that the global economy "muddles through", why would anyone own equities?
Brett Lewthwaite, Macquarie Investment Management


Sequencing risk - what's your philosophy?
This week, we start with two seemingly diametrically opposed views on the impact of sequencing risk and how to manage it, from Tim Farrelly and Michael Kitces. As always, I encourage you to read both and decide your own philosophy! Chris Watling laments over "helicopter money", arguing that ever more unconventional policy won't cure the world's low growth ills. Oliver Hartwich finds himself in two minds about Brexit, while on the finology front, Prof Moshe Milevsky starts a new series on investor debt. And, we bring you Vimal Gor's top 5-rated presentation from Markets Summit 2016 on why it's time to sell out high yield and EM bond exposures.

Reduce volatility to reduce sequencing risk?
We're often told that the answer to managing sequencing risk lies in locking into low volatility, low return strategies. It’s nuts and you can clearly see it’s nuts!
Tim Farrelly, farrelly's
17 comments | Opinion

Managing sequencing risk and retirement date risk
Sequencing risk is just as relevant for accumulators as it is retirees. Decreasing growth asset exposures in the lead up to retirement may be a very appealing risk management strategy.
Michael Kitces, Pinnacle Advisory Group 0.50 CE 4 comments | Research

Helicopter money – really?
The policy response to a hugely levered global economy has turned to a discussion about creating money to fund fiscal stimulus. The cure is not going ever more unconventional.
Chris Watling, Longview Economics 0.50 CE 3 comments Opinion

Should they stay or should they go?
The Brexit referendum is about where the British see the best chances for their future. The 'Out' camp has the better arguments. The EU needs Britain more than Britain needs the EU.
Oliver Hartwich, The New Zealand Initiative |

The day the King defaulted
The 1672 debt default by the British Exchequer is a 360-year-old tale of government finance that offers practical lessons to indebted consumers in the 21st century.
Prof Moshe Milevsky, York University

Don’t catch a falling knife: Avoid High yield and EM bonds
The market continues to misprice the risk of large scale defaults and debt restructures. Now is the time to sell high yield and EM bonds exposure, while you still can.
Vimal Gor, BT Investment Management 0.50 CE 1 commentResources
 * Rated in the top 5 presentations by Markets Summit 2016 delegates

Member comments
Investment Outlook Reports
A very good article. Unfortunately the majority of articles are quite biased towards the product... The one constant seems to be that any active manager states that this will be a market where stock picking is very important...

Adrian Frinsdorf
, William Buck Wealth Advisors Comment

The science of forecasting
I agree that most in our industry don't practice forecasting as a science. I completely disagree if your suggestion is that it is not field that is in some way inherent unscientific, and cannot benefit from employing scientific rigour...
Simon Russell
, Behavioural Finance Australia Comment

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