Investment Management Roundup – Week Ending 2.13.15

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This week’s Investment Management Roundup takes a look at why underperforming the S&P 500 can be a good thing, explores the landscape of risk and provides new evidence in the case for active management. We also discover the 1 BIG THING prospects expect to find in your marketing pitch books—and usually don’t! Finally, in the spirit of Valentine’s Day, let us introduce you to finance’s newest sex symbol. Happy reading!


“When underperforming the S&P 500 is a good thing”
Jeff Benjamin | Investment Insights | | 2.1.15

Investment Insights“As financial advisers roll through annual client reviews, many will face the task of having to explain how their portfolio strategies so badly lagged the 13.7% gain by the S&P 500 Index last year.

Fact is, a truly diversified investment portfolio should have returned less than 5% in 2014. It was that kind of year. Any adviser who generated returns close to the S&P was taking on way too much risk, and should probably be fired.”

“The landscape of risk”
Edwards and Lanzarra | S&P Dow Jones Indices | | December 2014

Distinguish crisis from opportunity“Those able to anticipate the trends in volatility have always been able to ‘time the market.’ The results of this paper suggest that the ability to anticipate trends in dispersion and correlations may determine a preference among equity factors as well. Their various levels can also characterize the source and nature of equity weaknesses. Taken together, a multi-dimensional view of risk may help distinguish crisis from opportunity—and for whom.”

“How to beat the market: Go big, go active, go in-house”
Nick Reeve | Chief Investment Officer Magazine | | 2.12.15

Value added by pension funds in different regions“However, Beath argued that the ‘single most important characteristic of funds that beat the market is active investing.’ The analysis found that asset owners who adopt fully active strategies outperformed fully passive investors by 72 basis points a year, without factoring in fees. After fees, the outperformance was 39 basis points—$39 million of added value for a $10 billion fund, Beath said.”


“Institutional Pitch Books – 1 Big Thing”
Anu Heda | Principal | Naissance | | 11.17.11

Institutional Pitch Books“In our support of institutional marketing organizations around the industry, we see numerous pitch books used during introductory conversations between the asset manager and the institutional investor.

There’s no single format, length, or organization that works across firms. But there is one recommendation we’d make for most managers regardless of firm size, region, and institutional investor segment.”


“Problems with ‘The long-term’”
Cullen Roche | Founder | Orcam Financial Group, LLC. | Pragmatic Capitalism | | 2.11.15

The power of diversification“The use of ‘the long-term’ in economics is often another version of ‘My model has been wrong so far, but if we wait long enough it will be proven right!’ This sort of flip flopping could allow someone to hold two opposing positions at the same time and get away with it. It’s a classic trick in economics and when someone flips between time frames it should immediately raise a red flag for you.

But economics isn’t where this concept is most abused. Modern finance has been driven largely by similarly unrealistic models of the world (largely derived from the same general models that [Milton] Friedman and the Chicago School of Econ. devised back in the 50s, 6’s and 70s).”


“Greece’s Varoufakis becomes unlikely heartthrob in Germany”
Eric Kirschbaum | Reuters | | 2.9.14

There’s hope for us all …

Peter Nicholls“What makes Yanis Varoufakis a sex icon” was a headline in conservative newspaper Die Welt over a story that raved about ‘his balding head, cool style and muscular Yamaha motorcycle.’”

Cartoon of the Week: The Valentine’s Dilemma
Explain xkcd |

Cartoon: The Valentine’s Dilemma

The worst resolution to the Valentine Prisoner’s Dilemma is when YOU decide not to give your partner a present but your PARTNER decides to testify against you in the armed robbery case.

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