Funds Hub

Money managers under the microscope

Manager warns of US government bond bubble

Those investors still gobbling up US government bonds as a nice defensive investment could be in for a nasty surprise, according to James Montier, a member of GMO’s asset allocation team.

Speaking at the CFA Institute’s European Investment Conference in Copenhagen, Montier said there was currently no margin of safety for investing in bonds as yields were just too low. “Rather than being a risk-free asset this could be about to become a return-free risk,” he said. “Historically, when people have bought bonds at these levels they have received a zero return or worse.”

Montier rejected the notion put forward by bond-bugs that the US was heading in the same direction as Japan 10 years ago, as the Federal Reserve has responded much more quickly than the Bank of Japan to fight deflation.

“Everyone loves government bonds at the moment because they have just delivered some incredible 10 year returns, but flows into bond funds are now higher than equity fund flows at the height of the TMT bubble,” he said, sending a shiver up delegates’ spines.

Morning line-up: Asian solar, bonds and correlations

News and views on the fund industry from Reuters and elsewhere:

RTR1SGF8Lands of the rising sun – Reuters

Bonds. Bubble? – Telegraph

Chasing the dream – Reuters

Don’t take it personally.. – Belfast Telegraph

New bid to solve hedge fund rules row – Reuters

Correlation swaps.. – FT Alphaville

Regulator turns eyes to annuity bets – WSJ

from Jeremy Gaunt:

And the investor survey says…

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Reuters asset allocation polls for August are out. They show very little change from July, which suggests investors are still cautious and uncertain about what is happening.

One big difference, month-on-month, was a large jump into investment grade corporate debt.  Andrew Milligan of Standard Life Investments reckons this  may in part  have been because  sovereign debt rallied so much over summer that returns from government bonds are now too meagre.

Trimming equities in the summer freeze…

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Leading investors around the world barely changed their exposure to assets in August, trimming equities slightly in favour of bonds, where they loaded up on top-notch corporates, Reuters polls showed on Tuesday.

Leading investors around the world barely changed their exposure to assets in August, trimming equities slightly in favour of bonds, where they loaded up on top-notch corporates, Reuters polls showed on Tuesday.

Watch the video by clicking the link below:

http://insider.thomsonreuters.com/link.html?ctype=groupchannel&chid=3&cid=138985&start=0&end=356&shareToken=Mzo0ODRmYWMyYy1kMjgxLTRhNjMtYmRjZS1iN2ZkYmY3OTNjNjY%3D

CQS upbeat on credit

It’s not often that the bigger hedge fund firms share their market positioning, especially at a time when funds are struggling to find decent investment ideas.

So it’s interesting to see CQS, which runs $7.5 bln, offering its views on credit markets.

Vanguard plans UK target retirement date funds

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US passive giant Vanguard is planning to bring its target retirement date products to the UK market to target the growing defined contribution (DC) pensions business.

Taking to Reuters at the Fund Forum, Tom Rampulla, managing director of Vanguard UK, said that the firm was currently trying to structure these long term savings products for the UK market, and looking to add key funds to support the offerings.

from Global Investing:

The art of being passive

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Hundreds or even thousands of  "active" fund managers are competing to add alpha to beat benchmark indexes, be it in stocks, bonds or alternatives.

water

The market is so efficient, historical performance is no guide to the future. It's nearly impossible to find a reliable method to pick advisers who deliver the best industry returns year in and out. There are also costs, from visible ones such as management fees and custody and administration expenses to "below water" costs such as trading commissions (due to higher turnover), bid/ask spread (price to buy, another to sell) and market impact costs (larger buy/sell orders affecting price).

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