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
The addition of the Chinese renminbi to the IMF's basket of reserve currencies is likely to accelerate foreign access to China's debt markets, one of the most significant milestones in integrating China into the international financial system.
Disciples of factor-based investing need to respond to a new challenge - while factor analysis is valuable for two reasons, investors are better served by a strategy based solely on allocating to asset classes, a new study claims.
Today's slowdown is truly global, with economies everywhere contributing to it. We witness "disappointing" growth, quarter by quarter, year after year. The consensus pays too much attention to China as the cause. So what really is behind all this?
The case for and against illiquid assets is hotly debated. Indeed, other than fees, the battle between industry funds and retail super funds has been heavily fought around significantly differing levels of exposures to the main illiquid asset classes.
We examine four situations where individuals make poor choices and review the research to show where the brain makes those decisions. In each case, we present some ideas about how to overcome the potentially suboptimal choice when it comes to investing.
Financial pundits routinely claim that US inflation is much higher than the reported statistics. Viewed over the longer term, however, US inflation is far lower than reflected in the published data, according to economist, Dr Woody Brock.
Since Angela Merkel singlehandedly opened Germany's borders to refugees, asylum seekers, migrants and any other nomads, the continent has been plunged into chaos. It threatens to wreck the European Union - or, at least turn it into an entirely different organisation.
To harness the full potential of India's growth story, investors should seek exposure to India's mid and small cap companies, rather than just the large, liquid companies with significant global revenue bases which dominate benchmark allocations.
In Putin's third presidential term, dissidents are routinely dubbed deviants, fifth columnists, and traitors, as the regime leads a drive for national unity based on religion, tradition, and paranoid rhetoric. For the moment, Putinism is the only game in town.
According to a Harvard Business School study, the percentage of US GDP attributable to the financial industry tripled from 1950 to the 2000s. Has any of this increase improved the services rendered by the financial services industry to the real economy?
The idea that financial markets are too focused on the short term is gaining ground in the media, academics and now, politicians. Upon closer inspection, the supposed negative consequences of investor short-termism appear not to be happening at all.
The efficient frontier for retirement income generally consists of combinations of stocks and income annuities - perhaps surprisingly, bond funds do not serve a useful role in the optimal retirement income portfolio.
The influx of refugees and economic migrants from Africa, Asia, and the Middle East appears as broad-based as the ancient migrations that defined Europe throughout history. Europe needs migrants from a purely economic perspective.
With interest rates at record lows, it is a really good time to revisit how we build debt portfolios. A three box approach can really help in making and communicating investment decisions for the secure part of their portfolio in the new, low interest rate environment.
An Oxford Uni paper in 2013¹ severely criticised consultants for failing to pick winners via their fund manager research. The New York Times picked it up. But the fact that consultants couldn't identify gold medal winners in advance doesn't matter.
Focusing on a client's investment portfolio alone ignores their greatest asset - their ability to continue earning income through the fruits of their labor, also known as their "human capital". Deciding how much risk to take with financial capital given a client's human capital risks is crucial.
Yellen has confirmed what should have been obvious all along - the Fed is not indifferent to international financial stress and its risk-management approach remains strongly biased in favour of "lower for longer". But four things about US monetary policy are frequently misunderstood.
In all of '87, '98, '05 and '15, the US economy was close to full employment, inflation was tame, commodity prices low, EMs were under financial strain, volatility roiled financial markets, the US dollar was strong, and US monetary policy excessively generous. What followed?
Europe in 2015 stands at the crossroads. The euro crisis and the refugee crisis are testing the foundations of the European project. Even if the EU survives this challenge, it will be a much changed and probably much weaker.
The Australian residential property market is stretched. But about to crash, triggering a recession? It's nuts and you can clearly see it's nuts.
The progress we have seen in European markets in 2015 is sustainable over the next 12 months. But, investors should temper return expectations and anticipate continued market volatility.
Real return investing isn't too real at all, with big targets like CPI+5%. It is an objective that is not strongly linked to the reality of investment markets - so prepare for another investment approach aligned with disappointment.
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.
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". This Resources Kit is a deluge of videos, podcasts, and papers for all sessions of the jam-packed program so you can "attend" and earn CPD.
If you want to understand falling oil prices, forget Chinese consumption and focus on Middle East production. And, if you want to understand the world economy, forget about stock markets - focus on the fact that cheap oil always boosts global growth.
Fears that China's economy is teetering on the edge of collapse are exaggerated. But it is slowing. And the slowdown will inevitably highlight problems that until now have remained largely hidden, triggering fresh bouts of market volatility.
This week's market correction is long overdue. It is also not over because the true underlying problems are much more serious than the commonly cited causes. And, at last, markets are teaching Xi and Li who in fact is the boss.
Investors should not buy stocks merely based on their volatility (or other risk) characteristics, but also take into account factors that are known to have a large impact on returns, such as valuation and momentum.
Infrastructure has gained greater focus in recent years, with investors drawn to its defensive characteristics. But infrastructure investing requires a tight definition to deliver the defensive attributes that investors are targeting.
Investors can substantially improve the risk/return characteristics of their strategic asset allocation by considering not only the classic equity premium, but also other premiums present in the equity market.
Six years into a bull market, Australian equity values are beginning to look stretched. But large divergences in valuations across sectors are creating great opportunities for truly active managers.
The increasing concentration of the Australian stock market indices is mirrored by the concentration of the Australian funds management industry. What does this mean for alpha generation?
There are three escapes the Fed had to make in order to declare its mission a success - escape from a liquidity trap, escape from quantitative easing, and, escape from the zero bound. Only the last remains. Will it achieve its great escape? Probably.
High active share is often profiled as "better" but such portfolios can exhibit risk concentrations which may lead to volatile return streams. Low active share funds should not be excluded from asset allocators’ tool kit.
The single most important macro-trend of our time is China's attempt to transform itself from a typical (if large) emerging market into an empire. The interesting bit for investors is that growing empires usually breed strong currencies.
The challenge in finding differential skill among active managers reflects a surfeit, not a dearth, of skill. This is the major lesson of the paradox of skill. As Napoleon was reported to say, "Ability is nothing without opportunity."
As we have just witnessed, it took an enormous effort to keep Greece in the eurozone. In the end, Europe could deal with the problem. For other members, such propping up will not always be possible. What happens next in France, Spain and Italy may well turn out to be more worrying than anything we have seen around Athens so far.
A simple ratchet-style "safe" withdrawal rate approach, where spending is increased by 10% any time the portfolio rises more than 50% above its starting value, beats the traditional 4% rule, generating equal or better retirement spending, even while being conservative enough to not require a spending cut in the event of a market pullback in the future.
This week, Chair of the Federal Reserve Janet Yellen has repeatedly said it is likely the Fed will lift its policy rate at its September meeting. It will be a minor adjustment but a momentous event. In short, I expect the first 100 basis points of Fed normalisation will have relatively little effect on long-term rates - with a critical caveat.
We should acknowledge the Greek crisis for what it is - the death-knell for the European dream of empire. The growing reality is the return of borders, national preferences, and opt-outs. The euro has become a structurally weak currency and European bonds are likely to underperform those of other, nonshrinking, empires.
Will alpha eventually go to zero for every imaginable investment strategy, as suggested by Swedroe & Berkin's The Incredible Shrinking Alpha? The idea of financial singularity may seem inspiring, but real world markets are nowhere close to it.
This is a special interest subsection of our wider Perspectives library in which we present research and opinion about lifecycle investing issues.
The classic 4% rule holds withdrawals at 4% of the initial value of the portfolio at retirement. A great deal of recent research has focused on strategies that adjust withdrawals depending on investment experience.
Four "big picture" geopolitical conditions will affect policy and markets going forward - in order of importance, the South China Sea, Russia returns, the end of Sykes-Picot in the Middle East, and the unwinding of the EU.
The surprising result of a recent study is that the "conventional" view that earnings rise steadily (above inflation) throughout our careers is not accurate. Good spending habits established early on can make an astounding difference to wealth over a lifetime.
This week, Portugal's sovereign bonds traded on negative yield - flying in the face of any sensible assessment of credit risk. There seems to be little chance that the ECB's belated and oversized QE program will end gracefully. Policy blunders never do.
With NZ fixed interest portfolios arguably harder to build than ever before, this paper introduces a framework for practitioners to build fixed interest portfolios for to meet the needs of individual clients.
Globally, technology shares are cheap on a relative basis. Tech investing has significant challenges but it remains the fastest growth segment and appears to have attractive valuations.
When combining managers together to form a multi-manager global equity portfolio, investors should aim to keep active share relatively high.
Investment 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 a robust investment philosophy.
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.
This paper by Rob Arnott and Denis Chaves looks the effects of different age cohorts on GDP and asset class returns.
Markets Summit 2015 - Cyclical? Structural? Secular? - featured 19 international and local investment experts debating their best ideas on the key cyclical, structural and secular issues driving the medium-term outlook for markets - and, of course, the implications for portfolios. This Resources Kit is a deluge of videos, podcasts, and papers for all sessions of the jam-packed program so you can "attend" even if you weren't there.
In this not-to-be-missed session of a not-to-be-missed program few prisoners were taken in debating the moot "overweight int'l equities, underweight Au equities.
The US secondary corporate bond market is in a time of significant upheaval. Changes to regulations has caused a new, insidious liquidity risk.
After a run of historically rapid improvement in living standards in the first decade of the millennium, emerging markets will face a more challenging outlook - not a crisis - over the next few years.