With the Federal Reserve today moving away from zero with a 25 basis point move, has anything changed my view that bond yields will stay lower for longer? I don't think it has. 2016 should be a very interesting market environment
With just an App, your smartphone can challenge an entire industry segment. Yet in investment management, superannuation and retail wealth management, we continue to do things much the way we did in the past. It is doubtful things will remain this way for long.
Crisis and Complexity explores over a dozen economic and financial catastrophes since 1720, focusing on both the unique characters and historical events that shaped each crisis as well as their common recurring pattern.
Turmoil often provides a fantastic opportunity to reassess one's portfolio - and we're currently going through exactly such turmoil. The question is: what are the critical issues that investors should focus on as they rethink portfolio positioning today?
PortfolioConstruction Forum Strategies Conference 2015 featured a carefully selected faculty of more than 35 international and local portfolio construction experts offering their best high conviction ideas about critical portfolio "crossroads". Here are the highlights.
Our eclectic Panel - a politician, a pastor, a professor, a portfolio manager, a practitioner, a provocateur, and a 'preneur, moderated by our Publisher - addresses Conference 2015 delegates' questions about key Crossroads, Dilemmas and Decisions.
A recent survey of 1000 Australian investors found that individuals who are advised have greater confidence in their retirement readiness and a heightened awareness of the retirement strategies and solutions available.
The danger that “sequence of return risk” can devastate a retirement portfolio is both increasingly recognised and frequently misunderstood. Three concrete, research-driven strategies can help manage it.
Portfolio construction specialists face a new set of challenges. What matters is the ability to deliver a robust and predictable outcome. This requires institutional capabilities.
While 36% of investors say they are ‘reviewing their need for downside protection’, only 8% are currently implementing it. Yet there are many strategies to manage risk in portfolios.
Going forward, there are headwinds for equity and fixed income markets, however the outlook for alpha generation from many alternative strategies remains robust. Now is an attractive point in the cycle to add, or increase exposure to alternative strategies.
High active share is often profiled as “better” but it creates a dilemma – portfolios can exhibit risk concentrations which may lead to volatile return streams for investors. Low active share funds should not be excluded from asset allocators’ tool kit.
The smooth sailing of Australian equities over the last few years has developed complacency among investors. But rougher seas ahead will require a more active approach. It’s time to ensure that you engage a truly active manager.
A better way to evaluate companies and portfolios is to consider where companies do business, not where they are headquartered. It is time to invest beyond borders.
Investors face five dilemmas on which judgments need to be made with respect to: earnings, valuations, momentum, reinvestment and sentiment.
As volatility in bond markets becomes more pronounced, and asset bubbles develop, investors will need to reassess their approach to the asset class. Unconstrained bond investors can exploit opportunities across relative value, yield curve and fixed income volatility.
Our panel debated the views of the two presenters who addressed this "crossroad" - that boutique investment managers outperform and that smart beta is dumb.
While the debate over the value of active management has intensified in recent years, the outperformance of boutique managers has been overlooked. Active boutique managers have consistently outperformed both non-boutique peers and indices over the past twenty years.
EM policymakers have wasted their commodity-fueled Goldilocks Era and are sitting at a crossroads. Without a dramatic policy shift, EM are a value trap, if not an outright bubble.
It's been almost 24 years since Australia's last recession. It could be said Australia is “due for one”. While it would be foolish to say that the chances of a recession in Australia are zero, it's also wrong to say that they are over 50%.
Special one-off factors have underpinned Australia's record expansion. The key to forecasting the next Australian recession lies in forecasting the end of cheap money – if correct, then clearly a major investment crossroad for all Australian residents and investors.
With traditional asset classes expensive and historically low yields on bonds compromising their role as a diversifier, investors are at a crossroads. Investors should be looking for alternative sources of return and genuine diversification.
Recent stock market volatility demonstrates that asset price growth expectations can’t be taken for granted in China, despite intervention from policymakers. The bursting of China’s property bubble poses a major risk to the stability of China and the global economy – and a critical dilemma for investors.
QE has driven a search for yield globally, resulting in a unique Australian experience that has seen the major ASX indices become increasingly concentrated. We are at the crossroads for active Australian equity management.
The US Federal Reserve is (reluctantly) ending a long period of abnormally low rates. Investors should consider flexible benchmark unaware approaches in their fixed income portfolios, to potentially mitigate adverse market conditions going forward.
Investors need to be more focused on downside risk management. An environment of lower expected returns and higher volatility means risk management is just as important as return management.
Consumers and the energy industry are at a crossroad. Customer choices are impacting different parts of the energy supply chain, but energy networks themselves are insulated from emerging technologies.
The diverse range of quality small cap companies with recurring earnings and growing dividend yields offer investors essential risk diversification and should be incorporated into portfolios.
The view that investors should leave their values at the door is fundamentally mistaken as both an ethical theory and an investment strategy.
Our panel debated the contrasting views of the two presenters who addressed this "crossroad" - that rates are likely to go higher than most expect over the next three years vs that markets will go on tolerating lower interest rates for far longer.
The view that markets will go on tolerating lower interest rates for far longer is the more benign, market friendly (almost bullish) outlook than the common thinking that higher interest rates will be good.
With the Fed signalling its intention to raise rates, there is great disagreement about the quantum of rises ahead. Rates are likely to go higher than most expect - and the risk of a material equity market correction is elevated.
It is time to properly account for risk characteristics of client’s most valuable asset - their human capital. This isn’t easy to implement and places practitioners in a difficult situation...
Divergences in global economic and policy outcomes have important implications for markets around the world. This policy divergence has directly influenced asset prices across the globe with implications for stocks, bonds and currency markets.
China now has to deal with a massive excess supply of property… This is unlikely to be “just another property cycle” in China. The bursting of China’s property bubble poses a major risk to both the country’s stability and the global economy.
In this environment, what’s very important is capital preservation. The problem investors have is that there are very few places to hide. So, while cash may not be king, I think it could end up being a very handsome prince.
Portfolio construction should focus on three risk buckets – beta, smart beta, and alpha. If not, you run the risk of creating a poorly diversified (that is, over diversified) portfolio – and, worse, a portfolio that costs far more than it should.
Each of our Symposium 2015 DDF presenters gave a 2-minute overview of their high conviction portfolio construction strategy idea.
Rather than large, liquid companies with significant global revenue bases which dominate benchmark allocations, investors should seek exposure to India’s surging local demand…
When combining managers together to form a multi-manager global equity portfolio, investors should still aim to keep active share relatively high.
uilding NZ fixed interest portfolios is harder than it has ever been… Portfolios need to be constructed for the specific needs of clients, which will typically be a combination of liquidity, income, quality, and diversification
At the coal face, engagement between company boards and institutional shareholders can achieve meaningful improvements for all investors. Perseverance and commitment are essential.
Investors will need to hunt out alternative sources of yield to meet their investment objectives. All is not lost. Yield can be preserved in a low yield world but investors need to be aware of the risks and trade-offs.
Each panelist outlined which high conviction markets idea from Symposium 2015 day one they agreed with most, and which one they agreed with least.
What return premia - if any - are attached to different types of investment risk? And just how reliable are those premia are in practice? Can the risks be diversified?
It’s possible, or more likely probable, that for future generations, our money will run out before our body does. This means that our historical models of accumulation and decumulation will not work for future generations.
As we all brace for lift-off in the key US Federal funds rate, a robust, top-down macro perspective will be even more critical to the success of portfolios than ever.
Our Symposium 2015 debated their high conviction ideas on the drivers of, and medium-term outlook for, the New Zealand economy.
NZ has plummeted down the global income per capita rankings from third in the 1950s to 23rd in 2015. Successive governments have done little to reverse the decline. Why have we failed to regain our position?
Our Symposium 2015 Faculty debated their high conviction ideas on the drivers of, and medium-term (two to three year) outlook for the markets.
Despite a genuine desire to invest in New Zealand on behalf of a substantial Australian superannuation fund, after several years of trying, no money has been invested.
For investors, one of the most important events of 2014 was the dramatic collapse in the oil price. The long-term equilibrium price is now likely to be lower. Overall, portfolios must be repositioned for increased volatility.
Returns in defensive equity yield and income sectors have been outsized as bond yields have fallen. Growth sectors have underperformed. But globally, technology shares are cheap on a relative basis.
World-wide low interest rates are not a temporary phenomenon. The world has changed and it is highly likely that the current low rate environment will be with us for decades. Getting used to low rates will be a critical adjustment for all investors to make in the coming years.
Slow growth is an old story. The new story is that world is finally beginning to re-balance - a process that unfortunately will take another 20 years. Well-intended policies are causing bubbles and distortions to asset prices.
PortfolioConstruction Forum Publisher and Symposium NZ 2015 Moderator, Graham Rich, opened Symposium NZ 2015 in his usual thought-provoking (and entertaining) way, highlighting key issues to consider over the jam-packed, marathon program.
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.
The world was shocked by the oil price collapse. Anuraag Shah, who made a fortune betting on a falling oil price, summarised the astonishment - "It's nuts!". Actually, it isn't.
In this simulated investment board meeting, our day's 17 international and local Faculty members debated and voted on whether to overweight international equities and underweight Australian equities in portfolios on a two- to three-year view.
In 2014, we witnessed the return of market volatility. With potentially significant market return and volatility, investors should consider portfolio positioning before the fact.
The fourth D confronting investors - the disruptions wrought by technological change. Cash cows, thoroughbred stocks and roll-ups are best placed in a world challenged by the four Ds.
While demographics will still dominate into the future, energy and automation are quickly rising to be just as important with significant implications for portfolios.
As its capital markets develop, the macro picture improves, inflation comes under control, and the economy grows, India's credit and rates markets present a compelling opportunity.
Since Q4 2014, oil prices have plunged, currency markets are at war and intraday volatility of stock indices is disturbing. A crisis mode has started. Asset allocators must mitigate risks before this next crisis inevitably hits.
One of the most important events of 2014 for investors was the dramatic collapse in the oil price. Overall, investment portfolios must be repositioned for increased volatility.
Lower 'neutral' monetary policy rates across the developed world will continue to serve as an important anchor for the secular valuation of all asset classes.
Emerging markets will face a more challenging economic and financial outlook over the next few years - but systemic risk across the emerging world is lower than before the Asian crisis.
Bond markets were once the world's most liquid. Today, trading even $5 million in bonds can be difficult. Managed fund holders must recognize that funds may limit withdrawals and hold larger cash balances.
Differentiation is key for emerging markets. Secularly, countries enjoying the rise of consumerism are expected to drive local company earnings above the global norm.