Funds Hub
Money managers under the microscope
from Jeremy Gaunt:
Getting there from here
Depending on how you look at it, August may not have been as bad a month for stocks as advertised. For the month as a whole, the MSCI all-country world stock index lost more than 7.5 percent. This was the worst performance since May last year, and the worst August since 1998.
But if you had bought in at the low on August 9, you would have gained healthy 8.5 percent or so.
In a similar vein, much is made of the fact that the S&P 500 index ended 2009 below the level it started 2000, in other words, took a loss in the decade.
That completely ignores, however, a more than doubling of the index between 2002 and 2007.
There is a danger sometimes in allowing the calendar to dictate your interpretation of financial market behaviour.
Morning Line-up: Investors get picky with emerging markets, BlackRock sets sights on U.S. retail
News and views on the asset management industry from Reuters and elsewhere:
Warier investors seek specialized emerging market funds – Wall Street Journal
Morning Line-up: Japanese ETFs, UK non-doms, Swiss hedge fund
News and views on the asset management industry from Reuters and elsewhere:
U.S. investors place record wager on Japanese funds – New York Times
UK wealth industry relief at new rules on non-doms – Reuters
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.
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!
from MacroScope:
What emerging animal are you?
Ever since Goldman Sach's Jim O'Neill came up with the idea of BRICs as an investment universe, competitors have been indulging in a global game of acronyms. Why not add Korea to Brazil, Russia, India and China and get a proper BRICK? Or include South Africa, as it wants, to properly upper case the "s" - BRICS or BRICKS?
Completely new lists have also been compiled -- HSBC chief Michael Geoghegan has championed CIVETS to describe Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa (ignoring the fact, as Reuters' Sebastian Tong points out here, that a civet is a skunk-like animal blamed for the spread of the deadly SARS outbreak in Asia).
Fun though some of this is -- and no one can argue that BRICs has not had an impact -- there is a danger that the acronym could become more relevant than the actual countries involved. For example, imagine Mexico, Uruguay, Panama, Philippines, Egypt, Turkey and Sierre Leone being lumped together because they spell MUPPETS.
With this in mind, the Spanish bank BBVA is now arguing that what is needed is a more dynamic concept, one that can remain in place acronymically, so to speak, but allow for new entrants without the need to rewrite everything. Enter BBVA's EAGLEs -- an Emerging And Growth-Leading Economy, defined by its incremental GDP rather than absolute size. The founding 10 are China, India, Brazil, Korea, Indonesia, Russia, Mexico, Turkey, Egypt and Taiwan.
But BBVA reckons that is not enough. It also has an EAGLE's nest, which included fledglings that might soon grow up to soar -- Nigeria, Poland, South Africa, Thailand, Colombia, Vietnam, Bangladesh, Malaysia, Argentina, Peru and the Philippines.
MacroScope likes the idea of animals coming to the aid of investors and economists. It would like to suggest FERRETs -- Fast Emerging, Relatively Robust Economic Treasures. But it encourages anyone who feels inspired to submit their own suggestions.
Why not just rummage around in the ATTIC? Top performing regional fund sectors this year: ASEAN, Thailand, Turkey, Indonesia, Chile. (we’ll conveniently ignore the fact the Philippines is actually at the very top)
from Jeremy Gaunt:
And the investor survey says…
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.
Here is the big picture:
from Global Investing:
Equities — an ‘even years’ curse?
Are global equity markets under an 'Even Years Curse' that sees them underperform bonds in even-numbered years but beat fixed-income returns in odd-numbered ones? After some number-crunching, Fidelity International's' director of asset allocation Trevor Greetham suspects so.
"It's not just hocus-pocus but to do with global inventory levels," he explained at a forum organised by the London-based investment house.
The inventory cycle typically lasts about two years. 'Up' years are good for company profits and equity prices with the inverse true when inventory levels are being drawn down. And over the last decade, Greetham notes, the 'stocking up' years have been odd-numbered calendar years while inventory draw-down years have been even-numbered ones.
Looking at the MSCI All World Equity Index, Greetham found equities generating a 69-percent return over the 12-year period starting from 1998. Breaking this down into odd and even years, equities went down by 30 percent in even years, and up by 143 percent in odd years.
On an annualised basis, growth was 4.5 percent, down three percent in even years and up 7.7 percent in odd-numbered years.
Compared against the JPMorgan Government Bond Dollar Index, equity returns beat bonds by 13 percent per annum on an average compound basis during odd-numbered years. In the even-numbered years, global stocks underperformed bonds by 15 percent.
from Global Investing:
What fund managers think
Bank of America-Merrill Lynch's monthly poll of around 200 fund managers had a few nuggets in the June version, aside from the usual mood-taking.
Gold is too expensive. A net 27 percent of respondent thought it overvalued, up from 13 percent in May. Then again, the respondents to this poll have reckoned gold is too pricey since September 2009.
The fall in the euro should be tailing off. A net 14 percent reckon the single currency is still overvalued, but that is way down from the net 45 percent who thought so in the May poll.
BP is good for pharma. The net percentage of fund managers who remain overweight in energy stocks plunged to 7 percent in June from 37 percent in May as oil has continued to spill into the Gulf of Mexico. The stock beneficiaries have been "dividend friendly" utilities, telecoms and pharmaceuticals.
China's growth is slowing. A net 27 percent of investors reckoned China's economy will weaken from where it is now over the next 12 months. That probably has mixed blessings given that investors both are expecting China to pull the world along the course of recovery and are worried about its economy overheating.
Overall, the poll showed fund managers to be cautious about the world economy but not giving up on riskier assets.
from Global Investing:
Too much correlation
Globalisation is evident in this graphic put together by James Bristow, a global equities portfolio manager at BlackRock. It shows the correlation between the U.S. S&P stock index and counterparts in Europe, Australasia and the Far East.
Basically, what happens these days on Wall Street is matched everywhere else, or vice versa.
It is a bit of a problem for long-term investors. One of the best ways to diversify used to be to buy outside your domestic market. Not so now. This is likely to push more institutional investors to non-correlated assets and hedge funds.
