Thursday, 8 December 2016

The mismatch between performance and fund selection | Industry | Moneyweb Today

The mismatch between performance and fund selection | Industry | Moneyweb Today: Moneyweb Today - Finance and business News in South Africa, JSE Indicators and SENS releases

Friday, 16 September 2016

Wednesday, 7 September 2016

Moneyweb: Lessons from the Nedgroup Investments Managed Fund

Bernstein: Passive Investing Is Worse for Society Than Marxism

The rise of passive asset management threatens to fundamentally undermine the entire system of capitalism and market mechanisms that facilitate an increase in the general welfare, according to analysts at research and brokerage firm Sanford C. Bernstein & Co., LLC.
In a note titled "The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism," a team led by Head of Global Quantitative and European Equity Strategy Inigo Fraser-Jenkins, says that politicians and regulators need to be cognizant of the social case for active management in the investment industry.

Indexing Is Capitalism At Its Best

Indexing Is Capitalism At Its Best

Thursday, 1 September 2016

Investec: US election: A new paradigm?

The rancour and taunts of July’s Republican National Convention laid bare a profound shift in the political atmosphere in the United States. Donald Trump’s presidential campaign has provided a strong figurehead for an anti-globalisation, anti-establishment, anti-immigration lobby. This movement largely rejects the Anglo-American mantra that dominates global finance and is institutionalised in the International Monetary Fund and the World Bank.

This sentiment is by no means confined to the US. Across the developed world there is discontent with the current status quo. In Europe this has been embodied by the UK’s surprise vote to leave the European Union in June, and in Austria where Norbert Hofer of the Freedom Party, a right-populist group with an antiimmigrant, Eurosceptic platform is in the lead for a re-run of the country’s presidential election. Even mainstream political parties are reconsidering their positions on key issues, particularly immigration and overt economic protectionism, in response to the rise of the right.
But the US is the world’s largest economy and last remaining super power. Even its partial withdrawal from global trade and geopolitical decisions will have fundamental implications for the future shape of the global economy.

The Evolution Of Smart Beta ETFs

The Evolution Of Smart Beta ETFs

Vanguard: Enemies of investment success

Wednesday, 31 August 2016



Behavioral Finance is no Panacea for Advisors

By Bruce Love

As behavioral finance gains increasing popularity among financial-advice processionals, some practitioners warn it is no panacea, and indeed there are dangers in misapplying it when advising clients.

Sunday, 31 July 2016

Cees Bruggemans: Where are we heading?

INCE Connect: Economic Insights

The world this past decade appears increasingly crisis-prone, restless, if not rudderless. There have been major policy interventions keeping things afloat, but not restoring a greater sense of purpose. Instead, we are anarchic adrift. And in some ways recuperating but in other ways getting ever deeper into trouble. Or so at least it seems.

Deep chasms seem to have opened up, inside countries and between regions. Do these matter, can they be overcome, or will they get a lot worse, as well as the restlessness and drifting?

It wasn't always thus. Just limiting ourselves to the modern period within living memories (of some), there have been long stretches when things developed much more purposeful. Was that just exceptional? Is our present condition more like the real long reality (life being a struggle)?

An old Soviet quote has it that "there are decades where nothing happens, and weeks were decades happen". So recent weeks haven't been that unique. It has happened before, as experienced by people at the time, and as experienced again now by some.

As to positive stretches, the post-WW2 world had a strong coherent theme (recovery, in the West and Japan, 1948-1968). It lasted 20 years plus. On a slightly longer view, parts of South East Asia and East Asia undertook massive economic transformations (1960-2000). China attempted its globalisation (1980-2010). Reagan in the US, and Thatcher in the UK, attempted their major reforms, ultimately competing Russian communism out of existence (the 1980s). Throughout there was the European Project (1950-2010). The 1970s belonged to the energy producers at the expense of slowing down much of the world. In the 2000s decade, large parts of Africa blossomed, as did India and some Latin American EMs.

Though that 70 year stretch saw a lot of coherent achievements, it also witnessed a few breakdowns - Korean War, Vietnam, Afghanistan (twice), Middle East strife, the lost energy decade of the 1970s, the Russian and East European lost decade of the 1990s, lost Latin American generations (in Argentina, Venezuela, Brazil and elsewhere). The European loss of momentum since the 1970s. The Japanese stagnation since 1990. And more such.

During the past decade, the world at large has blundered into a stagnation trap of an apparently universal nature, with only a few exceptions (India being one). And there has been growing unease within many regions.

The West (America and Europe) apparently lost much of its growth dynamic following the Great Financial Crisis starting in 2007. As a consequence, also for internal reasons, China had to change its development model more inwards. Many EM and others as dependencies of these leading regions lost their way, too. And geopolitically, major strains could be observed in western and eastern Asia, and regarding Russia, and resulting in western terror attacks.

Inside countries/regions, rising modern expectations became frustrated when colliding with growing hardship, societal underperformance and individual marginalization. Either that or wholesale rejection of Western influences and a flight back to traditional values. Democracy became the weapon of choice with which to hold elites and their favourite ideology (market capitalism) to account. Anger grew, and regime change has been widespread. Though large parts of Latin America in recent times have reformed away from populism, it is Europe, America and the Middle East where most change has occurred (and is occurring) (though don't lose track of China and India with billion-plus populations).

Where is this leading?

Crisis conditions and panic withdrawals were answered with aggressive fiscal responses (in some countries) and massive central bank support actions (nearly everywhere).  While these macro supports prevented depression of taking hold, and allowed recovery, an universal change seems to have occurred. Much greater anxiety and as a consequence less risk-taking and falling growth potential nearly everywhere, with slower growth recovery. And this despite new generations of technological change revolutionizing many parts of society and economies.

It cannot be claimed that the entire world has come to a standstill. Only parts have. Some parts are barely advancing, others are moving only very slowly and yet others are still quite lively if more subdued than before. Very much a multi-speed world.

If patience ruled, this wouldn't matter. Give it time, and the world will regroup, consolidate, and relaunch. Nothing new about that. Mankind has always come back, given enough time to respond creatively.
What is perhaps new is the universal anger. Sourced from deep expectations now frustrated. From having become a victim of some crisis, and as such marginalised and made an outsider, with little chance of being readmitted as an insider, with all its privileges. And beyond that loom ideological, religious and nationalist passions (hates) with in (too) many places a white-heat intensity.

So what we got here worldwide are shortfalls or gaps. In achievement (actual growth and wished growth), reabsorption (or remaining marginalised), in tolerance (religious, ideological, national, social, cultural).
Our existing tool boxes are deficient in ways and means to address all these things quickly. Noticed how slow-acting global politicians are? That's not because they are witless. There is just no known way to reconcile these many competing strains quickly with our current state-of-the-art governance and organisation structures.

We resort to fallback positions called central banks, experimenting with trillions in liquidity. But not experimenting on live populations could be worse if all fall down for a generation (worse even than a generation ago).

Friday, 29 July 2016

MoneyWeb: Is the JSE too small or is the investment industry too big?

South Africa has a unique investment industry. There are more than 1 000 collective investment schemes whose equity allocations are predominantly invested in a limited number of JSE-listed shares.

Tuesday, 28 June 2016

Brexit And The Future Of Europe

Brexit And The Future Of Europe

Brexit: What does Vanguard think?

Key highlights

The vote will have a significant impact on the U.K. and European economies, with global implications, but the effects may be years in the making.
The most immediate ramifications will be continued uncertainty and political change in the United Kingdom.
The IMF projects U.K. GDP could be more than 1% lower by 2021 under its most favorable scenario.
Given that it may take several years for the specifics to play out, each of which may rattle the markets, the best protection is broad diversification.

Tuesday, 24 May 2016

Vanguard: Desired versus required returns

Clients will often begin the investment plan construction phase with a desired return objective in mind, but the problem is that their expectations can be inflated by what they see or read in the media. Some clients might even be in a rush to skip building a comprehensive plan altogether and to fill their portfolios with investments sporting attractive recent returns.

These clients might be surprised to find that the return necessary to achieve their long-term goals is meaningfully less than their desired return, creating opportunities to build more diversified, less volatile portfolios. This research paper focuses on helping clients understand their required returns and the potential benefits of using the required return to build a long-term investment plan.

How Phil Mickelson Became Embroiled In The Dean Foods' Insider Case

How Phil Mickelson Became Embroiled In The Dean Foods' Insider Case

Ah, The Regrets

Ah, The Regrets

Wednesday, 4 May 2016

Wade Pfau: The Value Of Sound Financial Decisions

Fantasy Football-Style Investing Doesn't Work, An Advisor Says

Fantasy Football-Style Investing Doesn't Work, An Advisor Says Warren Buffett's take on active investment management

If you go to the Internet and you put in it’s a terribly interesting website. You can have a lot of fun with it because people take the opposite side of various propositions that have a long tail to them. They make bets as to the outcome and each side gives their reasons. You can go to that website and you can find bets about what the population will be doing 15 years from now…all kinds of things. Our bet became quite famous on there. A fellow I like, whom I didn’t know before – Ted Seides – bet that he could pick out five hedge funds. These were funds of funds. In other words, there was one hedge fund at the top and then that manager picked out who he thought were the best managers underneath, and then bought into these other funds in turn.
Thus, the five funds represented maybe 100 or 200 hedge funds underneath. Bear in mind that the hedge fund (the fellow making the bet) was picking out funds where the manager on top was getting paid perhaps half-a-percent per year plus a cut of the profits for merely picking out who he thought were the best managers underneath. In turn, they were getting paid maybe 1.5 or 2 percent plus a cut on profits. Certainly, the guy at the top was incentivised to try and pick out great funds and at the next level, those people were presumably incentivised too.

The result is that after eight years and several hundred hedge fund managers being involved, the totally unmanaged fund by Vanguard with very minimal costs is now 40-something points ahead of the group of hedge funds.
It may sound like a terrible result for the hedge funds, but it’s not a terrible result for the hedge fund managers. (a) You’ve got this top-level manager who is charging probably half-a-percent (I don’t know that for sure) and down below, you’ve got managers who are probably charging 1.5 to 2 percent. If you have a couple of percentage points sliced off every year…that is a lot of money. We have two managers at Berkshire. They each manage $9bn for us. They both ran hedge funds before. If they had a 2/20 arrangement with Berkshire, which is not uncommon in the hedge fund world, they would be getting $180m annually each merely for breathing. It’s a compensation scheme that is unbelievable to me and that’s one reason I made this bet.....

Read the full article:

Friday, 22 April 2016

Wednesday, 6 April 2016

Wednesday, 24 February 2016

Monday, 1 February 2016 US economic growth cools in Q4

Expansion in the world’s most important economy slowed to an annualised pace of 0.7 per cent in the fourth quarter, sharply down from 2 per cent rate in prior period. Economists had forecast growth of 0.8 per cent. For 2015, the economy expanded 2.4 per cent, matching the pace from 2014.

Thursday, 7 January 2016