26 April 2017

Performance Comparisons: Danger of first Impression

Fund Supermarkets (or Platforms as they are sometimes called) are a massive step in the right direction, i.e. giving private investors more control over their investments. But apart from the problem that each one of these sites can only cover so many funds the performance comparisons can be difficult to interpret. In the example below one would have to know what exactly is meant when a Sterling bond fund is having the 'Extra Yield' words in its name. Does it really make sense to compare it to the Investment Association's 'Strategic' Sterling bond fund? Is one comparing apples and oranges? However small the difference between the two, the verdict on the fund could be heavily influenced by it.
Royal Sterling Extra Yield Bond Fund - Analysis by Hargreaves Lansdown

25 April 2017

Robo-Advisers - useful but not ultimate Solution

Robo-Advice - like the (related) growth in 'passive' investment strategies and vehicles - can be a worthwhile addition to any investor's toolbox. But the devil is in the detail - apart from the 64000 dollar question (The selection of the right investment strategy, sector etc) most Robo-Advisers (or Websites) can only cover a limited amount of available investment products. In the case of the recently-launched eVestor I notice with interest that they claim they 'invest with the largest investment companies in the world'. All very honest, but bigger is not always better!
https://www.evestor.co.uk/our-story

19 April 2017

You cannot eat Relative Performance

In the world of institutional investment management beating the performance benchmark is the holy grail. When a fund loses money it is sufficient to lose less money than peer funds. But as a private investor you cannot be that complacent. You cannot eat relative performance. So the fact that the average 'Quantitative' or 'Systematic' fund is down during the past year is no consolation/. If you were sold on the idea that they offer performance that is not correlated with the big market indices you may well wake up to the fact that there is no surefire way to escape market volatility.
What’s wrong with AQR? - ValueWalk

14 April 2017

Long/Short Hedge Funds - did they provide what it says on tin?

The overall performance may have been disappointing with the main explanation (or excuse) the fact that QE distrorted the markets. The flood of money created a one-way street in the markets and hedge funds claim they are not geared up to be compared to long-only funds that profited from the bull market.
But one thing is forgotten in all this: while one may accept that hedge funds are not designed to compete with traditional funds the L/S funds should be able to navigate RELATIVE price moves in the markets and slowly accumulate profits while holding the market exposure broadly neutral. Careful performance analysis should shed light on the skill of the fund manager and how well they kept the portfolio in a market neutral (and therefore low risk) state.
THE LOST DECADE FOR LONG/SHORT HEDGE FUNDS

Fees on Alternatives expensive - Report

While Alternative Investments may offer good diversification they are unfortunately priced too expensively to offer a good risk/reward ratio. Performance - esp in Private Equity - may look attractive but remember that we experienced a long bull market that lifted all (asset) boats.
Complex Investments in Alternatives expensive

13 April 2017

Turkey To Confiscate Gold "To Help Citizens Earn Money"

Apart from the fact that Turkey cannot be compared to your typical 'Western' or 'Liberal' Democracy the lesson is again quite clear: if you think your wealth is protected in Gold you better think carefully how to go about it! (Hint: Bitcoin it is not!)
Turkey To Confiscate Gold "To Help Citizens Earn Money"

Passive Investing Will End In Pain

Index Investing, ETF's, commonly called 'Passive Investing' are no panacea as they mean that you will participate in any market decline to the fullest extent.
Passive Investing Will End In Pain

Checklist: How is your Financial Adviser compensated?

Poor compensation structures for your Financial Adviser may create incentives that are contrary to your interests!
Excessive focus on individual performance is inherently dangerous, says Barry Olliff | City A.M.

Active managers - not that bad

While quite a few 'active' fund managers hug the indices and charge fees as if they are trying to beat them not all is that bad as it is portrayed by some critics. Any fund manager needs to charge a fee as nothing can be provided for free. So performance really cannot be measured after fees, expenses. It is by definition a must that the universe of fund managers will under perform any index by the amount of costs loaded onto the funds they manage. Maybe these fees are rightly deemed to be too high but investors should not be brainwashed by the community of passive fund promoters. You get what you pay for, in this case the chance (hope?) that your manager will outperform the benchmark.
Bad times for active managers: Almost none have beaten the market over the past 15 years

12 April 2017

Ordinary Investor has no Chance against Market Insiders

Just ask your Financial Adviser: Where are the Customer's Yachts?

Federal Reserve's Fischer held private talk at Brookings - Business Insider