Owning or not owning 4% of the global equity market is not going to make or break any portfolio. As for being too big to ignore? It's nuts and you can clearly see it's nuts.
The distinction between free trade and protectionism not only misrepresents recent history, it also misconstrues today's policy transitions and the conditions needed for a healthy global economy.
August 1982 was a banner month. It saw the dawn of a new regime for investors – and for record labels – that was to run for 40 years. But in 2022, cash rates finally ended their 40-year decline. And the world turned for investors.
Three gigantic, global, interconnected risks have the potential to upend the world as we know it. Investors who understand these will be better positioned to successfully navigate the uncertainty plaguing our world.
In the same way that Moneyball has swept every professional sport, data science is bringing greater transparency to portfolio managers' decision-making skill. To select managers capable of outperforming, behavioural analysis is crucial.
At a time when "you can do anything", there are meaningful implications and opportunities for portfolio rebalancing and investors still structurally underweight bonds need to put aside recency bias and "do something" - now.
Opinions about private markets are often not rooted in facts, due in part to the fact that data on private markets has been scarce. But data is available and it debunks some of the common misconceptions about private markets.
Markets have undergone a regime shift - to prosper, we need to understand the factors that will be crucial to building multi-asset portfolios capable of delivering financial wellbeing in the years ahead.
This is Part One of our annual three-part Strategies Conference Investment Committee hypothetical. Our
independent consulting firm has provided a global economic outlook for the next three years, using a scenarios-based economic modelling philosophy.
Achieving equity like returns with much lower risk and equivalent liquidity is the holy grail that is now on offer from high yield.
Beyond a near-term sluggish outlook for global growth, practitioners should think about three key forces which will drive long-term market risks and opportunities.
Since central banks abandoned their ultra-loose monetary policies, currencies once again offer a source of investment returns, as well as portfolio diversification.
For the first two decades of their life, hedged funds produced outstanding returns on average. For the past 20 years, it's not been so good. In this Spotlight, we review the reasons why, and whether there are any hedge funds worthy of inclusion in portfolios.
Advice Engagement is a framework that helps advisers focus on understanding their clients' needs and improving their outcomes, by improving the likelihood that the client will accept and follow the advice.
While the US dollar's share of global foreign exchange reserves is in long-term decline, the currency's dominance will continue despite the rising risk of embedded inflation.
As economies slow, fixed income will once again provide portfolio diversification, allowing practitioners to focus on capturing long-term trends such as climate change and artificial intelligence.
As we move into an era which is both more inflationary and more volatile, asset allocators will need to adapt in order to deliver returns. A dynamic and unconstrained approach to asset allocation will become essential.
The authors of this paper propose that it's not just confirmation bias, but the way it interacts with a specific set of fundamental beliefs that generates a surprisingly wide array of bias effects.
Until the early 1950s, investing was an art. Then, along came the publication of work undertaken by Harry Markowitz (1952). Over a 20-year period, this played the primary role in moving investing from an art to a science.
The bulk of the research on sustainable investing has concentrated on returns. These two papers look beyond that to whether investors are so committed to sustainability that they will continue to invest irrespective of returns or fees.
Protecting capital in down markets is the foundation for superior returns – and quality investing, with a long-term investment horizon, protects shareholder wealth on the downside, while capturing steady capital growth.
In recent decades, the world's wealth soared as low interest rates drove up asset prices. But the global balance sheet is rife with fragilities. How the world borrows, lends, and creates wealth may change fundamentally.
Industry funds don't use up to date valuations on their unlisted assets, and this is effectively cheating on their performance reporting? That's nuts and you can clearly see it's nuts.
Over the past 15 years, as behavioural sciences gained widespread recognition, economics has progressively acknowledged the significance of the biases that drive individuals and firms to behave irrationally.
The arguments for and against active and passive management are much more nuanced than is often suggested by proponents on either side. In this Spotlight, we review the hard facts as represented by the S&P Index Versus Active (SPIVA) data, which farrelly’s views as the definitive database on active management.
Active management has consistently delivered outperformance in small companies as the opportunity set allows managers to demonstrate both stock selection and portfolio construction skill.
Only buy High Yield Debt when it is super cheap? It's nuts and you can clearly see it's nuts.
Fragmentation and decoupling are becoming the new normal - US and China remain on a collision course, and a dangerous deepening of the ongoing "geopolitical depression" is all but inevitable.
Decision attribution analysis provides a crucial lens on equity manager skill, benefiting asset owners and fund buyers as they select and monitor managers.
Investors today have more knowledge than any prior generation, however there remains a chasm between knowing and doing. Acknowledging we are all biased, because we are all human, is the first step to better decisions.
CRE Debt provides dependable returns, backed by real property first mortgages. On a risk-adjusted return basis, every balanced portfolio should include an allocation to CRE debt.
The energy transition represents the greatest economic opportunity since the industrial revolution. Reliably capturing the potential and delivering tangible environmental impact requires three core beliefs.
Unlisted assets provide access to a bigger opportunity set that reflects active management in its truest form, giving opportunity for investment managers to further diversify multi asset portfolios with rich investments across diverse industries.
A partial allocation of retirement savings to a contemporary lifetime income stream can help increase the certainty of delivering what the income that retiree clients want. And such an allocation can help clients preserve assets.
To better develop the skills required to analyse corporates, we can start with individuals as case studies and scale from there. If analysts can't do that, it's unlikely they can address more complex situations.
...though not unconditionally. The nascent field of Neurofinance suggests that investors attuned to their emotions can make better decisions during critical market events.
We can help retirees build and retain their sense of control by keeping on building trust and educating them, modelling possible outcomes and showing a planned approach – including providing a Plan B.
A critical part of any retirement plan is a spending plan (which is not the same as a budget). Ultimately, a good spending plan helps keep clients' investments on track.
In a wide-ranging speech last week, Janel Yellen reversed the terms of US engagement with China, prioritising national-security concerns over economic considerations.
This Research Roundtable focused on the Ruffer Total Return International (Australia) strategy, with senior practitioners deciding, after briefings, Q&A and debate, their individual rating for the strategy and whether to include it on a hypothetical APL and/or multi-manager portfolios. Afterwards, the meeting is truncated and published for on-demand viewing by all Forum members.
Established in 2009, Markets Summit is THE investment markets scene setter of the year, focusing on the key drivers and outlook for the markets. As usual, 2023 Faculty were each challenged to offer their best high conviction proposition in the context of the program theme - this year, "Every VUCA cloud has a silver lining!" Their high-conviction faculty propositions can be distilled into three key discussion threads, supporting the case that, for portfolios, every VUCA cloud has a silver lining! Watch the highlights video, read the key takeouts - and then delve into the high conviction presentations that most interest you.
As the clouds of Volatility, Uncertainty, Complexity and Ambiguity continue to swirl, the silver lining is that we are on the road back to normal monetary policy settings, from abnormal, and a return to more rational asset prices. But we must be patient.
Those constructing portfolios must understand the nuances of bond risk/return drivers and how bond market performance can be impacted by different macro scenarios. Opportunities abound.
Inclusion of private equity as an alternative asset in portfolios is an out-of-date approach that does not consider secular trends in companies staying private and the unfolding democratisation of PE.
As economies continue to recover from the catastrophe of Covid-19 lockdowns, we must re-embrace the pursuit of progress, an idea that is central to science, freedom, and a thriving society.
After a chaotic period, across most asset classes, silver linings are emerging. Global equity investors can capture these by identifying companies best placed to benefit from shifts in energy and technology.
Once the decision has been made to invest in global small caps, fundamentals return to the fore. Limited research coverage and inefficiencies in the market are the opportunity.
Investors will have to work harder to make money than just owning US beta. The silver lining is that there are large equity markets and sectors that are cheap with significant growth drivers.
After a lost decade, cyclical and structural headwinds are abating for emerging market equities, while profound secular changes are becoming tailwinds. But the path ahead will look very different to the past.
ESG analysis advances and drives sustainable investing by helping investment practitioners develop a clearer view of a company's true market value, consistent with their fiduciary duty.
Our diverse panel of experts debated which of the high conviction propositions they heard during Markets Summit 2023 they most strongly agreed with and why, including identifying "silver linings" (investment opportunities not yet fully priced into the market) and which they disagreed with most and why - and the portfolio construction implications of both.
This lecture explores the concept of ethics, contemporary issues in financial services as they relate to ethics, and the relevancy and application of ethics in our everyday lives.
Value investing has proven successful over time but it requires discipline and a long-run horizon - and disagreement remains over whether the value premium will persist. What's your philosophy?
Uncertainty and change are unavoidable realities of life. In the spirit of thinking differently and embracing uncertainty, I offer you this year's global developments to watch over the next five years.