Crises can be useful - highlighting our investing strengths and weaknesses. What we do with this information determines whether portfolios survive or thrive during the dislocation and in the post-crisis environment. A live and on-demand zoominar series, All Things Considered will challenge your portfolio construction beliefs, helping you identify which remain valid and which require new thinking, to inform your investing knowledge, beliefs and behaviours and help you build better quality investor portfolios.
The quarterly Dynamic Asset Allocation is published electronically, and emailed to subscribers in early March, June, September, and December. It features farrelly's Editorial; long-term outlook for markets; Forecast in Focus; and three different approaches to Implementation...
Classical economists often incorporated human behaviour into their thinking. But in the 1960s and 1970s, homo economicus - the great rational agent of economic theory - was born. It was not until the 1990s that the link between human behaviour and economics began to be re-established.
Finology is the interesting and unique mix of behavioural finance ("fin") and investor psychology ("ology") as it relates to giving investment advice to individual investors.
Behavioural finance supplements traditional financial and investment theory. Findings in the field of behavioural finance may help advisers, consultants and clients better manage their thoughts, feelings, and actions when investing.
Established in 2009, Portfolio Construction Forum Markets Summit is THE investment markets scene setter of the year. With interest rates near historical lows and asset prices around all-time highs, practitioners are grappling with the defensive side of multi-asset portfolios. Downside protection is essential in such an uncertain environment. Arguably, the best offence is a great defence! Markets Summit will help you better understand the key drivers of and outlook for the markets, and the opportunities and risks ahead on a three- to five-year view, to aid your search for return and to help them build better quality investor portfolios.
These tutorials relate to various of the IMAC lectures and are available to CIMA candidates currently completing the Investment Management Analyst Certificate course.
This lecture instructs IMAC candidates on the fundamentals of investment portfolio performance measurement and attribution.
This lecture instructs IMAC candidates on the fundamentals of the portfolio review process.
To say a lot has changed since I spoke to you back in February at Markets Summit 2020 is an incredible understatement. Between now and Markets Summit in February 2021, I'm going to be watching three things.
This lecture instructs IMAC candidates on the fundamentals of investment philosophies and styles.
This lecture instructs IMAC candidates on the principles of investment manager selection and blending in portfolios.
This lecture instructs IMAC candidates on the principles of various portfolio risk management strategies.
This lecture instructs IMAC candidates on practical issues in setting a strategic asset allocation for a portfolio.
This lecture instructs IMAC candidates on principles of international investing.
This lecture instructs IMAC candidates on the foundations of asset allocation in three parts - key principles of asset allocation, optimisation and how to define an asset class.
The world today is an acceleration and escalation of the world that existed before Covid-19, rather than a whole new world. Broad, multidisciplinary thinking is essential.
In the past, ESG considerations were seen as a choice or a preference but, going forward, they are increasingly becoming a necessity in the evaluation of investment opportunities in a whole new world!
Decarbonisation and data growth will dominate every aspect of our lives for decades to come. If your infrastructure manager isn’t leveraging off these themes then you need to find a new one.
For investors needing more from their fixed income allocation, global convertible bonds offer a whole new world of opportunity.
We are at the threshold of an epic bull market buoyed by the emerging Buenos Aires Consensus and desensitisation to Covid-19. But beware, inflation will eventually re-emerge.
Incumbent investment frameworks such as Value, Shorting, Passive and Index Aware strategies are failing. Going forward, successful investors will need to be extremely selective when allocating capital.
The Covid-19 crisis has triggered a step change in policy, accelerated trends and transformed investment frameworks. Opportunities will arise out of dislocation – but a more regional view is required.
The tech-wreck of the early 2000s was ground zero for the birth of a succession of Australian technology companies that have disrupted markets and established themselves as global leaders.
On 3 November, US voters go to the polls. The presidency will be determined once again by 14 swing states and six of them really matter.
Post GFC, inflation risk skewed to the downside with central banks fighting against disinflation and deflation – and the market is potentially under-pricing inflation risks going forward.
While it may not be a new approach, ESG investing creates risk-aware portfolios that are more likely to outperform over the long term.
Traditional business models will increasingly be challenged. To win, companies will need to spend for the future and investors will need to take a longer term view to define ‘value’.
Post Covid-19, Australian company dividends were cut by 30% overall but it is still possible to achieve 5% cash yields with up to 2% franking credits from a well constructed portfolio.
The Covid-19 pandemic is accelerating pre-existing consumer trends. The new world winners will be those businesses which focus on culture and purpose, and which aspire to make a positive difference.
Understanding what has really changed in people's values as a result of Covid-19 and the influence of emotions will prepare us for the increasingly polarised economic, geopolitical, social and environmental new world order.
Investors should not attempt to time, but rather allocate to well-diversified and balanced multi-factor portfolios and provide consistent exposure to targeted factors.
Since the early 1980s, developed market government bond yields have broadly been falling, with investors voicing concerns that the asset class offered little or no value. Continually, they have been proven wrong.
Covid has accelerated tech adoption on an unprecedented scale and while the winners have been broad, not all are equal. Short-term investors with simple valuation techniques are missing the bigger picture.
Unlike ESG investing, impact investing accelerates the allocation of capital to solve the world’s climate and social challenges.
Driven by Covid-19, 2020 saw economics 101 meet market psychology. Today, fear and greed set up a rich opportunity set on long and short sides.
In the US, a durable and economic bottom has formed, and global investors are well-served to re-frame their mindset towards the incipient economic expansion now underway.
This lecture instructs IMAC candidates on the characteristics and analysis of options, futures and other derivative investments.
This lecture instructs IMAC candidates on the characteristics and analysis of debt investments.
This lecture instructs IMAC candidates on the characteristics and use of alternative assets in multi-asset portfolios.
This lecture instructs IMAC candidates on the on the the definitions and characteristics and the use of real assets in multi-asset portfolios.
This lecture instructs IMAC candidates on the principles of equity securities and analysis.
This lecture instructs IMAC candidates on the principles of fund manager search and selection as it relates to identifying quality managed investments for possible inclusion in portfolios.
This lecture instructs IMAC candidates on the features, uses and applications of different types of managed investment vehicles.
This lecture instructs IMAC candidates on the fundamentals of client discovery and formulating an Investment Policy Statement in the investment consulting context.
It turns out that 'retiring’ and withdrawing from productive life actually conflicts with our own natural drivers of well-being. The concept of ‘retirement’ is an obsolescent by-product of the industrial era that needs to be retired.
This lecture instructs IMAC candidates on the history of global capital markets and the key principals of capital market valuation.
This lecture instructs IMAC candidates on the fundamentals of applied economics with an Australian perspective.
This lecture instructs IMAC candidates on the principals and applications of behavioural finance theory.
This lecture instructs IMAC candidates on the theory and application of the Efficient Market Hypothesis.
This lecture instructs IMAC candidates on the theoretical and empirical underpinnings of portfolio management, specifically in relation to how portfolios are designed and measured.
Market pricing goes to the heart of everything we do in constructing portfolios. But the risk-free rate is artificial as central bank manipulate interest rates to stimulate economies. The implications for asset allocation are significant.
This lecture instructs IMAC candidates on the statistics used to describe and analyse the risk and return characteristics of securities and portfolios.
The first All Things Considered webinar was foundational. Our panel of expert portfolio construction practitioners and academics made the case for questioning our investing activities, and identified some “sacred cows” that are most consequential to investment outcomes AND in greatest need of revision.
During accumulation, the concept of portfolio longevity is quite meaningless. Eventually, peak-wealth is achieved and withdrawals exceed investment gains. Managing portfolio longevity becomes critical.
A year ago, I showed it's possible to measure prediction accuracy for active managers, and that it influences optimal portfolio construction. Is this still a valid approach to portfolio construction, given today's markets?
The impact fixed income market is becoming more diverse in terms of currencies, issuers and ratings, delivering mainstream returns but with impact.
This lecture argues that a diversified portfolio of core fixed income securities is an essential component of an optimal multi-asset portfolio. What's your philosophy?
With crisis comes opportunity. Much of the bad news is now reflected in stock prices and, while stock markets will re-test their lows in coming weeks, expect a rally during Q2 2020.
Joe Biden had a fantastic night on Super Tuesday and he could be the Democratic Nominee - but a lot can change over the next month. Meanwhile, trade relations between the US and China may falter if China struggles to honor its commitments due to a weak economy.
Most of us want to act on our values, but we also need to feel that we have a reasonable chance of doing so effectively and successfully. Rather than focus on ethical analysis, focus on ethical implementation.
Refocusing sustainable investing efforts onto client values and beliefs starts a chain reaction that delivers sustainable outcomes for clients and long-lasting relationships.
Used responsibly, artificial intelligence can help us make wiser decisions as investors and capital allocators and help us work towards a more sustainable and inclusive future.
New research shows that media sources generate emotions that transmit to individuals and so influence their investment decisions, resulting in a departure from so-called efficient markets.
Behaviour biases determine that performance drives managed fund flows. By examining managed fund transactions, we can confirm that investment adviser engagement with investors is critical, and ascribe a value to it.
By identifying their own systematic patterns of departure from "rational" behaviour, practitioners can compensate for their effects, and improve the quality of their day-to-day investment decision-making.
Over shorter periods of time, there are market inefficiencies due to well researched behavioural biases. Knowledge of these can help improve our own investment decision making and that of our clients.
Several of our Faculty discuss their key takeouts from Finology Summit 2020, to help delegates think through how people's different investing biases, beliefs and behaviours impact investment outcomes.
Using the language of client values and behaviour will help build a foundation of trust, and assist investment advisers architect a portfolio that is in sync with clients' lives and values.
Behavioural biases get in the way of good investment decision-making. A well-structured approach to goals-based planning can go a long way to defeating the worst impacts of many of these biases.
A fixed point of reference, in the context of investment risks and uncertainties, can induce biases in approaches to meet client objectives. These biases will be costly to investors in the long term.
As we scramble to make sense of occurrences such as coronavirus and climate change, the application of prior cultivated imagination can preserve the integrity of investment decision making.
Markets Summit 2020 facilitated debate on the key drivers of and outlook for the markets (on a three- to five-year view) - with particular emphasis on being alert to the high VUCA risks and opportunities ahead - to aid your search for return, and to help you build better quality investor portfolios.
In the decade ahead, ageing demographics, income inequality, market share concentration and climate change will reshape the economy, elevating the VUCA facing investors, requiring deep fundamental research to determine where best to invest.
Coronavirus represents a Black Swan event, the economic shock of which to China will reverberate around the world, thereby amplifying and exposing global economic weaknesses.
Market capitalism has survived many rotations of the political cycle over generations. But there is nothing certain or given about capitalism – and today, its future is being called into question, with growing calls to fundamentally change the system.
US/China trade tensions and the coronavirus outbreak highlight that a VUCA world abounds. But this does not change long-term trends that make emerging markets ripe for investment.
It must be something about Davos. High profile names again spoke out about the attractiveness of the equity market. But the economic cycle is not over. Boom/bust has not been banished.
After a blockbuster 2019 for bond returns, investors should moderate their return expectations while watching for VUCA events and tail risks, especially trade, Brexit and the US elections.
VUCA issues are going to increasingly drive market outcomes. Mapping out different scenarios is a must to check your biases as well as challenge your own, others' and consensus views, and generate investment ideas that help manage VUCA and target the right opportunities.
VUCA is alive and well. The environment requires a disciplined, risk-based approach that considers the direction of market risk appetite to identify the right assets at the right time.
Our diverse panel of experts debates which of the high-conviction propositions they heard during Markets Summit 2020 resonated most strongly, and which they disagreed with most, and the portfolio construction implications.
As growth becomes more scarce in developed markets, the valuation gap between emerging market equities and developed market equities will close. Within EM, Asia is the place to be investing.
Bull market longevity tells us nothing about the timing of the next bear market. Valuations are a helpful warning, but don't inform us on the timing because the trigger is normally a shock.
The current VUCA environment creates opportunities for investors to increase diversification and income in their diversified portfolios, using carefully selected, higher yielding parts of the credit market.
As the old certainties break down, the response from policy makers has been to stimulate economies. The liquidity provided is particularly evident in longer dated growth assets. In the context of the Australian market, Australian mid caps is the sweet spot.
With an ageing demographic seeking more stable outcomes, many investors have been steadily increasing allocations to infrastructure securities, to capture the attractive relative income and low volatility.
The world has checked into Hotel California – interest rates are failing to stimulate demand and monetary policy is less effective. Successful adaptation will require a re-think of traditional strategic asset allocation approaches.
Low inflationary outcomes and very low interest rates are expected to remain in place for some time. REITs have resisted the attraction of cheap credit and will continue to provide a safe haven.
Trade Wars, the US Election, Brexit 3.0, natural disasters and pandemic risks are causing fear and uncertainty in Australian equity investors. The key to capturing opportunities is to focus on what matters to long-term returns.
Practitioners should examine portfolios for slow or no growth equities, priced like bonds, whose attractions may be inundated by a wave of fiscal stimulus.
Investors are facing a "Code REDD" with reflation, election, duration and disruption all key themes. The reflation theme is favouring a rotation into more cyclical sectors, lower duration assets and lower rating bonds.
High household debt places Australia in a fragile position for further disinflation, implying that bond yields will remain lower for longer. Investors should look to accumulate bonds and ensure portfolios have an appropriate defensive allocation in anticipation of the next downturn.
The best response for investors pondering a future that is always VUCA is to ground their decisions in investment basics. In short, look for mispriced quality companies.
Investors can gain exposure to high quality real estate through global REITs, which offer exposure to sectors experiencing better growth prospects and benefiting from tech disruption.
Markets require constant accommodation to deliver status quo economic (not market) outcomes. Watch for changes in liquidity provision as forward markers of performance.
Corporate bond spreads are now tighter than they were before the GFC, yet corporate leverage is higher. Buy financials, sell corporates.
Emerging market assets and the Australian dollar present as having the greatest upside risk through the remainder of 2020-21.
Innovative firms spend their money on research and long-term investment, rather than on share buy-backs and paying out dividends. To benefit, investors must think in decades.
To fully appreciate the risks and opportunities in a high VUCA environment, portfolio construction practitioners must adopt a mindful approach in order to adapt to unexpected events.
Venture capital is evolving globally to deliver both financial outcomes and also significant and measurable social impact for investors, entrepreneurs and communities.
Traditional metrics suggest equities appear overvalued, but other factors argue against this and indicate a sustainable equity advantage.
The US-China trade deal was supposed to settle global trade uncertainty in 2020. Nothing could be further from the truth. Diversified supply chains are vital to minimising VUCA risks into the 2020s.
Many of the discussions at Davos this year revealed that global elites are struggling to respond to important economic and environmental challenges, in a highly volatile, uncertain, complex and ambiguous world.