Consolidation within the Asset Management Industry
This blog post comments on a newer phenomenon of asset managers closing its doors or merging with others. A case is made that the market conditions will lead to more of this occurring in the near future.
Liquidity Conditions and Trading Costs around Christmas and the New Year
This post examines historical trading volumes in December for equities and investment grade credit and offers advice to investors considering implementing changes to their portfolio allocations before the end of the year.
Minimum volatility – in a sweet spot, but for how long?
This blog highlights the strong performance, in terms of both return and risk, of “minimum volatility” strategies, particularly over the last couple of years, and examines some of the potential reasons for this. It also looks at potential future bumps in the road, such as a changing interest rate environment, elevated valuations, and possible changes in fund flows into this area.
Do You Really Know Your Emerging Market Equity Exposure?
In this blog post we describe what appears to be a persistent issue among global and non-US equity managers; that on average, these managers underweight emerging market equity. We explain why this might be a bad time to be underweight and propose solutions for resolution.
We review the recent performance trends of “130/30” strategies, which involve a limited amount of shorting, but remain beta one (maintain equity exposure). While a surface look at recent performance in databases seems favorable, a deeper dive serves as a reminder that that there is no panacea in the search for alpha and that one is required to identify truly skilled managers in less efficient asset classes.
Capacity Management: To close, or not to close, that is the question
Capacity management for equity strategies is a crucial element of evaluating not only how an investment manager plans to manage its overall business, but the impact it might have on potential value added for a strategy versus its benchmark and peers. Capacity management practices can differ noticeably across investment managers and the total estimated capacity will heavily depend upon the size and characteristics of the strategy’s investment universe and the type of investment strategy employed.
Market and Portfolio Construction Impacts on Active Management Performance
A discussion of the sources of active equity management’s general underperformance in 2014 and 2015.
Small Cap Alpha Myth - Revisited
This post challenges the common belief that U.S. small cap equity is a particularly attractive space for active management, offering investors increased likelihood of outperformance compared to other areas of the market. The paper concludes that this is simply a myth. In fact, active management within the US small cap market is difficult and offers no clear advantage. The paper examines realized alpha, including the impact of database biases and benchmark misspecification, and transaction costs to reach this conclusion.
Delving into Smart Beta
While active and passive investing have long been popular methods of investing, a potential third approach has emerged to challenge both these methods. It is known by various names, including "smart beta," "advanced beta," and "style" or "factor" investing. This method has grown out of some dissatisfaction of traditional methods and is explored in this post.
When the Glass is Half Empty – The Long and Short of Short Selling
This post examines the practice and use of short selling within an equity long-short portfolio and describes several of the more common short selling approaches.