growth of assets hedge fund industry since 1990Robo-Advisors, Active Myths And Hedge Funds

Articulating value to clients is going to be increasingly important as robo-advisory companies like Wealthfront continue to grow: “this type of log-in, answer-a-survey, get-your-portfolio-underway type of experience has attracted millions of dollars from investors of all sizes…’If people’s expectations of what they can get from a financial advisor were higher, these service providers would have less of an appeal.’”  Furthermore, “’so many people have such low expectations of what a wealth advisor can provide that advisors really end up looking like a commodity’…a true financial advisor acts like an investor’s personal CFO, fulfilling a task that goes well beyond portfolio construction such as accounting and tax advice, but consists of a holistic approach to wealth management that’s worth the cost.”  Also, “robo-advisors might rebalance your portfolio for you, but they won’t stop you from bailing out of your investments in bear markets.”  Meanwhile, “there is no evidence to support the notion that active stock selection is easier when there is wide dispersion among individual stock returns…If stocks are all heading largely in the same direction, (i.e., have relatively low dispersion), in theory, an active stock picker should find it particularly difficult to construct a portfolio that beats a benchmark index.  On the other hand, during a period when individual stocks are acting more like independent assets, there should be a greater opportunity for skillful (or lucky) investors to outperform…although there is higher dispersion among active fund returns during periods of high stock market dispersion, this fund dispersion does not increase the likelihood of outperformance by active managers within the large-cap US market segment.”  Meanwhile, hedge fund assets under management set a record in Q1 2014 at $2.7 trillion; the 7th quarter in a row for record setting asset levels.  “Equity hedge strategies led the way with $16.3 billion in fresh investor cash.  Event-driven funds followed up a 2013 of big inflows with another $4.1 billion in new capital.”

62 Percent Of Americans Enjoy Lying

“A Gallup poll published Monday says that 62 percent of Americans say they enjoy saving, while only 34 percent say they enjoy spending.  This is up from 2013, when 60 percent of Americans said they enjoy saving and 37 percent said they enjoy spending.”  That being said, the average personal savings rate has been declining over the last four decades (11.8 percent in the 70s, currently at 4.5%).  Also, “30 percent of surveyed Americans say real estate is the best long-term investment, followed by 24 percent who opt for gold, and 24 percent who prefer stocks and mutual funds.”  Similarly, a Bankrate survey of over 1,000 households shows that 73% of Americans are “not more inclined to invest in stocks.”  “It all seems counterintuitive until you consider what investors have had to endure over the past 14 years: Two crippling bear markets that saw stocks lose more than half their value, the worst economy since the Great Depression and the perception that market gains are the product of nothing more than rocket fuel from the Federal Reserve that is bound to run out at some point in the not-too-distant-future….One constant among market pros asked about investor sentiment is that the lack of avid enthusiasm is a contrarian bullish sign.”

Chinese Reform Update: Private Capital, Asset Management Holding Companies

“In recent weeks, some of China’s top conglomerates have announced spin-offs and restructuring plans, local authorities have been experimenting with new management structures, and political sources say a group focused on state enterprises plays a prominent role among six teams that form President Xi Jinping’s economic brain trust…Provinces and major cities are already running trials aiming to bring more non-government capital to the firms they control and embracing new management structures and incentives…Guangdong, Hunan and Guizhou are also allowing for the first time senior executives to own shares in firms they manage.  Local governments are also experimenting with using asset management companies to act like value-driven institutional shareholders rather than an extension of government bureaucracy.”  Meanwhile, “China plans to establish a land registration system by 2016 and make it operational within two years, the country’s Ministry of Land and Resources said, part of an effort by Beijing to make the real estate market more transparent.  Also, meet BYD, the Chinese conglomerate producing carbon-free products (like electric buses) near Los Angeles, with the help of Warren Buffett.

USA: Introduction To The Floating-Rate Note Treasury Security

“The new two-year FRN is a fixed-principal security with quarterly interest payments and interest rates indexed to the thirteen-week Treasury bill…From an investor perspective, FRNs have less exposure to rising rates because of the frequent rate resets, and they pay interest more frequently than current coupon two-year securities.  At the same time, FRNs may offer investors a slightly higher yield and fewer transaction costs than consistently rolling over a position in the thirteen-week bill, despite providing nearly identical cash flows.”


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s