Funds Hub
Money managers under the microscope
from Global Investing:
Inside the Reuters investment polls
The headline news from our Reuters asset allocation polls this month was that not much has changed from December in terms of overall investment positioning, but that there was a decided shift from emerging markets and European stocks to North America.
But buried in the numbers were a couple of other things:
-- Bonds are decidedly unpopular among fund managers. The overall global allocation was the lowest since February.
-- Bond underweights have also been getting heavier and heavier since summer and now reflect significant bearishness.
-- Within bond portfolios, however. U.S. debt was on the up, at levels not seen for at least 12 months. This contradicts the widely held view that Treasuries are losing their appeal.
-- High yields are also clearly popular with a shift to "junk" from investment grade.
The Treasury finding is a bit strange, but other than that there was nothing in there, really, to disturb the proponents of the risk rally.
The Naked Truth
By Ed Moisson, Head of UK & Cross-Border Research at Lipper
Do independent asset managers perform better than bank-run funds?
Lipper was recently approached to analyse the difference in performance between funds operated by broader financial services companies (banks and insurers) and those managed by ‘pure play’ asset managers.
This research came in the wake of comments made by Peter Hargreaves, founder of IFA Hargreaves Lansdown, who said in September that many funds in the UK run by banks were “seriously crap”.
With the temperature apparently rising, it might be a little foolhardy to enter such a debate. Yet objective analysis is surely where independent fund researchers can best provide a useful contribution. Besides, it might be gettin’ hot in here, but I for one will not be takin’ off my clothes.
For those wanting the details of my approach, please scroll to the foot of this article. For those with shorter attention spans, we can cut to the chase and reveal that for ‘pure players’, or what are sometimes called independent asset managers, the greatest proportion of funds were most commonly in the first and fifth quintiles (the worst and best relative performers), presenting a u-shaped curve for the distribution of these groups’ fund returns. This pattern was most pronounced for 3- and 5-year performance, while over 10 years the differentiation between quintiles is smaller.
Click here for the charts for UK-domiciled funds: http://r.reuters.com/ren77r
Morning Line-Up: Pay up, fees and revenues down, industry reeling
News and views on the asset management industry from Reuters and elsewhere
Fund manager pay rising faster than revenues - Reuters
Hedge funds back to fundamentals – Financial Times
Morning Line-up: U.S. probes wider and takeover by stealth
News and views on the asset management industry from Reuters and elsewhere
Barai Capital under U.S. govt scanner - Wall Street Journal
Man Group launches ETF using broker tips – Financial Times
RBS pushes into retail funds – Independent
Morning Line-Up: Carlyle, Chinese Stocks, Prudential Inc
News and views on the asset management industry from Reuters and elsewhere:
Carlyle acquires Dutch fund of funds – FT
International funds move into Chinese stocks – Wall Street Journal
from Reuters Money:
Actively managed ETFs and other wrinkles
The following is an edited excerpt from Never Buy Another Stock Again: The Investing Portfolio that Will Preserve Your Wealth and Your Sanity, written by David Gaffen, who is the Reuters markets editor. It was printed with permission of FT Press, an imprint of Pearson.
One of the biggest growth industries in finance right now is in exchange-traded funds, and further growth in ETFs appears likely to come from several places.
Sector or country-specific ETFs and actively managed ETFs are likely to continue to be a growth area, along with perhaps a combination of the two (an actively managed ETF focusing on small-cap stocks, for instance).
The most popular sector ETFs are in natural resources and technology, although State Street, which sponsors the SPDRs ETF, has S&P sector ETFs for nine of the ten S&P sectors (telecommunications is the lone exception—it’s folded into another area); new ones continue to crop up.
For professional investors attempting to beat the market, they’re an ideal vehicle because they carry a relatively low cost and have tax efficiency, as David Kotok of Cumberland Advisors has pointed out. But John Bogle, in his book “The Little Book of Common-Sense Investing,” quoted (anonymously) a chief investment officer at an ETF company cautioning against “pin-pointed” bets on sectors, because they “still involve nearly as much risk as concentrated stock picks.” But that doesn’t mean they’re going to stop growing.
Like mutual funds, tech stocks, tech funds, and other hot investments that dominated the landscape for a time, the ETF world is turning into its own “app economy,” as Nicholas Colas, chief market strategist at BNY ConvergEx Group, puts it. This, by itself, is not necessarily a bad thing, but with more choices comes more confusion.
Another area where one can expect a growth spurt is in actively managed ETFs, first introduced by investor Harry Dent with his Dent Fund through AdvisorShares, which is now marketing other new actively managed exchange-traded funds. And so ETFs are starting to come full circle: While this is still designed for the same kind of tax efficiency and liquidity offered as most ETFs, now investors have the (supposed) benefit of active management—but the higher expenses to boot.
UK universities eye and keep an eye on new hedge fund punts
Pension schemes are moving away from the usual equity/bond/real estate mix to put their eggs in as many baskets as possible. No wonder then that the USS — the 31.6 billion pounds UK universities pension fund — is putting an extra 1.5 percent of its assets, or about 474 million pounds, into hedge funds, as its CIO Roger Gray tells Reuters.
If you are rushing to the phone to pitch business with Mr Gray, however, STOP a minute fund manager: be prepared, the USS is not only eyeing alpha, it is going to ask a few questions about how alpha is distributed and how investors are protected.
“Is the board of the hedge fund constituted in a way which gives us assurance that they are actually acting in the interest of the limited partners rather than in the pocket of the managers?” he said.
Key words for this pitch: governance, transparency, best and practice.
Key advice for this pitch: forewarned is forearmed. (The USS does not seem to need the usual ’caveat emptor’ advice).
Go forth, brave hedgie!
Steer clear of the free lunch, says Noster
Diversification is meant to be the only free lunch in investing.
But according to hedge fund Noster Capital, with most markets looking toppy and with problems ahead, it’s not necessarily one that investors would be wise to tuck into.
“This is not the time to be invested in broad ETFs or in very diversified funds, because the indexes will likely not do much in aggregate,” it says in its end of year letter.
“We feel that most asset classes are currently approaching untenable levels, and while they could certainly grow dearer for some time to come, in most cases we have long passed the level where investors are being adequately remunerated for the risks they are taking.”
Markets are likely to be range-bound for the next 3-5 years, meaning that just buying and holding stocks might not be the best approach, says Noster.
“The likely way to succeed in the years ahead is to be very selective and tactical about what one owns, to be ready to sell if assets approach fair value and, most importantly of all, to be protected and retain liquidity so that one can take advantage of opportunities that will transpire when any of the myriad things that could (and will) go wrong, do.”
This current rally continued for longer than I expected -similar to what happened after I began my warnings in early 2007 but the fun didn’t start until mid 2007.
It’s now extremely overextended and the very overdue correction actually started last week IMO.
FX market and gold/silver have already given the signal and these warnings should not be ignored.
stockmarket618.wordpress.com
Morning Line-Up: Man, Mobius, Hintze
News and views on the asset management industry from Reuters and elsewhere:
Man Group still bleeding assets despite GLG deal – Reuters
Templeton’s Mobius considering setting up hedge fund – Reuters
Hedge fund founder Michael Hintze donates 2 mln to National Gallery – Guardian
For small hedge fund, success brings new headaches – New York Times Dealbook
California pension fund portfolios grow by more than 12 pct – Sacramento Bee
Morning Line-Up: PAI auction, buy-out study, US banks results
News and views on the asset management industry from Reuters and elsewhere:
PAI Partners auctions Compagnie Européenne de Prévoyance – FT
