Funds Hub
Money managers under the microscope
GUEST BLOG: Edge over the markets and do you have it?
This is a guest post from author and former hedge fund manager Lars Kroijer. The piece reflects his own opinion and is not endorsed by Reuters. The views expressed do not constitute research, investment advice or trade recommendations.
Most literature or media on finance today tells us how to make money. We are bombarded with stock tips about the next Apple or Google, read articles on how India or biotech investing are the next hot thing, or told how some star investment manager’s outstanding performance is set to continue. The implicit message is that only the uninformed few fail to heed this advice and those that do end up poorer as a result. We wouldn’t want that to be us!
What if we started with a very different premise? The premise that markets are actually quite efficient. Even if some people are able to outperform the markets, most people are not among them. In financial jargon, most people do not have edge over the financial markets, which is to say that they can’t perform better than the financial market through active selection of investments different from that made by the market. Embracing and understanding this absence of edge as an investor is something I believe is critical for all investors to understand.
Consider these two investments portfolios:
A) S&P500 Index Tracker Portfolio like an ETF or index fund
B) A portfolio consisting of a number of stocks from the S&P 500 – any number of stocks from that index that you think will outperform the index. It could be one stock or 499 stocks, or anything in between, or even the 500 stocks weighted differently from the index (which is based on market value weighting).
from Global Investing:
Banks lead the equity sector flows
Banks and financials stocks have had a pretty good year. The Thomson Reuters Global Financials index is up by more than 20% in the last 12 months, and although the detritus of the financial crisis still offers the occasional sting, investors are starting to see brighter spots for the industry.
That confidence is increasingly obvious in the fund flows.
Our corporate cousins at Lipper track more than 7,000 mutual funds and ETFs which are dedicated to specific industry sectors. Dig a little into the data in this subset of funds, and you start to get a pretty good picture of where the biggest bets have been placed.
from Global Investing:
US investors prop up emerging equity flows
U.S. mutual fund investors are ploughing on with bets on emerging market equities, according to the latest net flows numbers from our corporate cousins at fund research firm Lipper. Has no one told them there's supposed to be a massive sell-off?
August was the 30th straight month the sector has seen net inflows, and the 9th straight month of net inflows above $1 billion. Sure, there's a downward trend from the February peak, but the resilience of demand is notable given doom-laden headlines about how EM markets will fare once the Fed feels its generosity is no longer required.
from Global Investing:
Signs of growth bets in the fund flows
Just as Germany helps to embolden hopes for a robust recovery in Europe, a look at detailed fund flows data offers more cheer to the optimists.
I've been seeing which equity fund sectors saw the greatest net inflows during July, and then filtering the top 20 by flows relative to the sector's total assets. There's a clear winner.
from Global Investing:
Signs of growth bets in the fund flows
Just as Germany helps to embolden hopes for a robust recovery in Europe, a look at detailed fund flows data offers more cheer to the optimists.
I've been seeing which equity fund sectors saw the greatest net inflows during July, and then filtering the top 20 by flows relative to the sector's total assets. There's a clear winner.
from Global Investing:
Emerging markets funds shun Brazil, South Africa
Global emerging markets equity funds have cut average weightings to Brazil and South Africa for the fourth straight quarter, according to the latest allocations data from fund research firm Lipper.
You can see a full interactive graphic of the allocations data here or by clicking on the snapshot below.
from Global Investing:
Eyes off the prize?
It's starting to look like investors in Britain's top companies have reverted to type.
Reuters ran the numbers on voting at FTSE 100 annual general meetings (AGM) last week and you would be forgiven for thinking the 'shareholder spring' had never happened. The average vote against executive pay deals at the 71 top companies which have so far held their AGM was down 18 percent from the result for the full FTSE 100 in 2011. The raw number has to be viewed with caution; investors claim victory in forcing companies to engage, cut absolute pay and tweak bonus arrangements, even though there is little direct evidence so far of pay moderation in absolute terms.
from Global Investing:
Hedge fund boss Baha sees gold at $3,000-$5,000
Christian Baha, the head of Austrian fund firm Superfund and representative of the hedge fund industry in Oliver Stone movie Wall Street 2: Money Never Sleeps, is predicting that the gold price could rise to between $3,000 and $5,000 over the next five to 10 years.
Baha, who says he has more than half his personal wealth in gold and silver, either physically or in units in Superfund funds denominated in the precious metals, believes that an unprecedented phase of quantitative easing by central banks is driving a bubble in government bonds, but that gold offers real value.
from Global Investing:
The only game in town
The extent of the surge to Japan by equity investors is written in sparkly 50-foot-high neon letters by the latest flows data out from Lipper.
We all know that Abenomics has, thus far, cast a spell over markets; the Nikkei is up about 80 percent since the middle of November, when Shinzo Abe first started looking like a bona fide challenger to win power. But it is still startling to see how flows into Japan have dominated investment behaviour.
from Global Investing:
LIPPER-Toil triumphs over talent for ‘star’ fund managers
The tumult caused by Richard Buxton’s move from Schroders to Old Mutual in March highlighted the veneration of “star” fund managers, those select few who apparently rise above the crowd to shine their light upon adoring investors.
We don’t need to dwell on Buxton’s track record (annualised return on his UK Alpha Plus fund of 13.7 percent over 10 years), but combined with Mark Lyttleton's departure from BlackRock - his own star rather faded of late - I am drawn to ponder the funds industry’s views of, and hunger for, stellar talent.
