This paper discusses balancing liquidity, income, valuation, risk and diversification objectives in building property portfolios. It examines the key questions currently confronting Australian investors – How should investors gain exposure to offshore assets? Which markets provide appropriate income levels? How can direct property be included in a portfolio without sacrificing liquidity? What are the current valuation conditions in markets? – and demonstrates the characteristics of an optimal property portfolio.
Hybrids have delivered uncorrelated high returns combined with low volatility over the past five years. This paper explores why, despite some changes in the return equation, their reduced risk and still healthy returns make hybrids one of the most compelling income sub-sectors....
In a small, concentrated market like Australian equities, fund capacity is an important consideration for investors. This paper discusses why the most important factor in determining capacity is an Australian equity manager's style and the best representation of style is actual performance and trading history...
Short of time? This is one Journal paper you shouldn't miss. It examines why and how India should be a key component of investors’ exposure to emerging markets, arguing that investors should not limit themselves to just one leg of the BRIC/emerging markets story...
A market-weighted approach has been the traditional way of constructing international equity portfolios – often because this is the type of benchmark index against which fund managers are measured. But is this the best approach? Building market cap-weighted portfolios is not the mantra of all active, large cap equity managers. This paper examines an alternative construct for an international equities portfolio that encapsulates potentially greater investment returns and a better way of assessing portfolio performance.
In theory, funds management is a highly scaleable business where profit growth results from increased funds under management (FUM) while product quality (investment returns) remains unaffected – alpha creation is purely a function of portfolio construction through time and the size of the portfolio is irrelevant. However, there is reason to believe the product quality of a funds management business is not independent of FUM. The difference between the theoretical world and the real world relates to transaction costs. This paper describes transaction costs, and considers factors likely to influence the level of these costs, before turning to the impact of size and investment style on excess returns.
Global economic growth in Asia has produced unprecedented demand for commodities – and opportunity for investors. This paper examines the benefits of investing in commodities and discusses how an active approach to commodity investing may mitigate downside risk, and create alpha opportunities that are unavailable to passive commodity index investors.
Chinese authorities have embarked on Gugai, the Mandarin word for share reform. This paper explains how the Chinese authorities are addressing inefficiencies in the country's share markets and the much-criticised banking system, as well as seeking relieve some of the social tensions and environmental pollution arising out of China's fast economic growth.
The search for global alpha should include developing economies on several levels. Recently, the role of emerging markets in the global food chain for the manufacturing and distribution of products and services has significantly increased. Investors monitoring this shift can find valuable information that could potentially drive stock prices of companies in different parts of the chain. This information may not be visible when viewed discretely from an individual country or even continent standpoint and provides global investors with a distinct advantage.
This paper examines traditional approaches to buying international equities, highlighting some of the problems with capitalisation-weighted benchmarks, and suggesting that replicating a global index may no longer be the optimal solution for those investors with longer-term investment horizons. It looks at some of the new strategies available to capture beta and illustrates how diversification can be used to manage risk for investors in a less constrained portfolio.
Traditionally, investors have gained exposure to listed property via the Australian listed property trust market. However, the changing Australian property investment environment, combined with greater investment in global property assets, has resulted in the emergence of global property securities as a credible investment choice. Where and how does global listed property fit in a diversified portfolio?
Over each of the past five years, the returns on a diversified international bond portfolio fully hedged back into Australian dollars have well exceeded the return realised on a typical Australian bond portfolio. As a result, many fixed interest clients are looking to increase allocations to international bonds. This paper examines some of the reasons why international bond portfolios have outperformed their Australian counterparts and asks whether this is likely to continue.
Short of time? Here's another Journal paper you shouldn't miss. It examines key infrastructure investment considerations, the risks of investing in infrastructure, valuations, and infrastructure's place and role in a targeted return portfolio...
The global equity benchmark excludes many opportunities as the industrial advantage shifts to the so-called emerging economies. This paper challenges the conventional belief that history is the best guide to determine the optimal composition of the international equities component of a portfolio. It examines why it makes sense to structure an investment portfolio that emphasises global themes and relationships, as opposed to geographic regions. It looks at how a thematic approach to investing identifies the major secular, cyclical and structural influences on the world’s stock markets, and how consistency, risk control and diversification are managed.
Has the role of traditional fixed interest managers changed? This paper explores why it remains critical to have fixed interest in portfolios, both as a tool to lock in income and also as a defensive play. It asks "How do fixed interest managers keep pace with investor demand for greater returns, in a world where spreads are tight even in what are considered more risky securities?" Finally, it argues that with the prospect of rising inflation, declining GDP and a new Fed Chairman throwing uncertainty into the mix, perhaps locking in CPI + 4% isn’t a bad thing!
The 5th Annual PortfolioConstruction Conference featured a core, independent 13-hour plenary program over the two days, designed by the PortfolioConstruction Forum's specialist, experienced and independent team. As always, we selected our plenary speakers based solely on their portfolio expertise (not the size of their wallets! None of our plenary speakers paid to speak)...
Following on from the successful offerings of Nexus 1, 2 and 3 by Deutsche Bank, Nexus 4 - the first foray into a managed CDO by Nexus - has recently announced that it has suffered an event of default in its income portfolio...
Emerging markets have been out of favour with mainstream investors since the series of financial shocks in the late 1990s that culminated with the default by Russia on its sovereign bonds in 1997. So what has changed since then, to bring emerging market debt back into favour (with a number of new products being released that provide exposure to emerging market debt)?
How would a global bird flu pandemic affect financial markets? If past history, including the effect of SARS in 2003 is anything to go by, the effect would be significant...
