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Money managers under the microscope

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.