Challenging your portfolio construction beliefs
Fodder this week challenges some common portfolio construction beliefs (the aim on which we founded the Forum). Tim Farrelly challenges one of the barrage of reasons not to buy Australia's major banks. Michael Edesess challenges the (almost) universally accepted principle of periodically rebalancing portfolios. Tribeca Investment Partners takes aim at the sense of long-term investing. PIMCO's outgoing CEO, Doug Hodge, puts forward a challenge to all asset managers but, actually, Doug's challenge applies to us all. And, we re-profile our recent Backgrounder on the challenges of managing the friction between short-term and long-term investing imperatives.
All the best for a great weekend's continuing education - Graham
P.S. One of the realities of today is that geopolitics matters when building portfolios. Join me in November to hear geopolitical authority and Pulitzer Prize finalist, Professor Stephen Kotkin from Princeton University, hosted by Conexus Financial.

LATEST...

Investing
The banks at risk of an Aldi moment - sell!
The latest reason offered as to why not to buy Australia's major banks is that their margins could be taken away by a well resourced disrupter. Should we not own the banks, as a result?
Tim Farrelly, farrelly's | Opinion

Strategies
The failure to understand rebalancing
We've been drilled that rebalancing portfolios results in improved returns and/or reduced risk. But the benefits of rebalancing are far smaller than we’ve been led to believe.
Michael Edesess, EDHEC-Risk Institute | Opinion

Markets/Investing
Long-term investing is a fool's paradise
A range of cognitive biases leads investors to generally overestimate their skill. A long-term investment strategy simply compounds this problem. A long-short investment structure can improve outcomes.
Tribeca Investment Partners | White Paper

Philosophy
Asset managers must adapt to serve their clients
Client needs are changing. And these changes will challenge asset managers, especially as the industry goes through consolidation.
Doug Hodge, PIMCO | Opinion

Philosophy/Markets/Strategy/Investing/Finology
Backgrounder: The long and short of it
Managing the fundamental friction between short-term and long-term investing imperatives is a key challenge when building portfolios.
PortfolioConstruction Forum | White Paper

Delta model
Michael's model is fantastic. We use it for researching managers and explaining decisions to clients...
Justin Hooper, Sentinel Wealth | Comment

Measuring recessions
...Couldn't agree more. Every time I drive in Sydney traffic I wish we were targeting GDP per capita as our measure of prosperity.
Tim Farrelly, farrelly's | Comment

RECENTLY...

Markets
Monetary reform - looking in the wrong places
Zero and especially negative nominal interest rates are a fool's game. We are entering the late phase of an ageing expansion when asset price bubbles and poor credit decisions sow the seeds of the next crisis.
Dr Robert Gay, Fenwick Advisers | Opinion

Markets
The economic trend is our friend
Economic growth since 2008 has been profoundly disappointing and pessimism understandably comes easy these days – perhaps too easy. If we look at global economic growth over the next 30 to 60 years, the picture looks much brighter.
J. Bradford DeLong, University of California | White Paper

Strategy
Flexibility is key to goals-based strategies
Individuals underestimate the degree to which their lives will change over the long-term, so how can practitioners build portfolios which are likely to meet their clients' future needs?
Michael Kitces, Pinnacle Advisory Group | Opinion

Investing
Look for the signal within the noise
Using a simple case study, this paper illustrates an approach to cutting through fund performance "noise" to find the signal - the bigger picture investment view that enables us to construct better investment portfolios.
Michael Furey, Delta Research & Advisory | 1 comment | Research

Markets/Investing
Spurn the supernova and fight the fear of fixed income
Bond market Cassandras proclaim the formation of a supernova, warning of the investment perils. It's time to spurn this talk, and stick with the core, defensive anchor provided by global fixed income.
Jeff Grow, UBS Asset Management | White Paper

Bakers dozen
Perhaps I'm missing something... Firstly, isn't the constant price series rebased each year as a reasonable response to the distortions you refer to?
Stephen Romic, DFS Advisory Services | Comment

Bakers dozens
This is not really a matter of distortions, just different measurements capturing different effects. As for the new bakers production...all I can say is good try!
Tim Farrelly, farrelly's | Comment

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