Hope you all had a safe and happy 4th of July weekend. Here are some thought-leadership articles we’ve been reading and thinking about!
“The rise of passive investment has made alpha a shyer animal: Do we serve our clients best by simply beating a given benchmark net of fees, asks Allianz’s Elizabeth Corley.”
Elizabeth Corley, Chief Executive | Allianz Global Investors | ft.com | 7.5.15
Allianz’ Elizabeth Corley argues that active management and active fees promise more than alpha. Adding value and fulfilling fiduciary duty require being active client service operatives, providing quality advice and making the necessary investment in client-facing professionals and supporting infrastructure. Check out her excellent article at on.ft.com/1LQ4LVg.
Summer’s finally here! And while living isn’t necessarily easy, it’s sure more pleasant in our neck of the woods these days.
Every summer needs a good reading list, and we’re obliging with a curated list of some of the most popular white papers, published articles and guest blog posts we’ve written over the last year or so. And while we don’t expect you to trade in your newest summer thriller or romance novel, our selections have the distinct advantage of being a) relatively short, b) very readable and c) a quick way to catch up on work-related topics without feeling like you’re actually working!
So enjoy! And don’t forget the hat, sunscreen and sunglasses!
“First Impressions Matter: The Importance of Typography in Investment Management Presentations and Reporting”
Assette | assette.com | 4.24.15
“Risk management is biggest concern for institutional investors—survey”
Sophie Baker | Pensions&Investments | pionline.com | 5.6.15
“Increased complexity in risk management is the biggest concern for institutional investors across the globe, a new survey shows. Commissioned by BNP Paribas Securities Services and conducted by polling firm YouGov, the survey found the idea that risk management will become more complex is the biggest concern for 23% of respondents.”
“Active and Index Funds: How Do They Really Stack Up?”
Christine Benz and Ben Johnson, CFA | Morningstar | morningstar.com | 4.16.15
“… not all passive strategies, not all benchmarks, are created equal. It underscores that understanding benchmark construction, understanding how reflective an index is of the opportunity set that’s available to active managers in a given category is going to go a very long way toward defining whether or not it will look more or less successful relative to an active strategy.”
“The Real Point of Active Investing: Outperforming the market is not the goal”
Marshall Jaffe | Managing Partner, Jaffe Asset Management | ThinkAdvisor | thinkadvisor.com | 4.6.15
“‘… The goal of active investing is to outperform the market.’
… I cannot count how often I have seen variations on the theme of this apparently sensible observation. There certainly doesn’t appear to be much, if any, argument with its conclusion. It is so ingrained in our thinking and so seemingly obvious that I’ve never come across anyone who was willing to claim that the goal of active investing has nothing to do with outperforming the market.” So I’ll do it: ‘The goal of active investing has nothing to do with outperforming the market.’”
“How Social Media Is Influencing Institutional Investor Investment Decisions”
Pat Allen | Rock The Boat Marketing | us1.campaign-archive1.com | 3.19.15
“In November and December 2014, Greenwich Associates, working with LinkedIn, fielded an online survey of 256 global institutional investors including 100 in North America, 105 in Europe and 51 in the Asia Pacific. The survey targeted decision-makers and influencers of investment decisions at their institution (top three titles: chief investment officer, portfolio manager, investment analyst) who used digital platforms at least once in the past year to learn about financial topics related to their investing role.
“ … Most surprising to Greenwich’s Managing Director Dan Connell and [Legg Mason Director] Ryan was that one-third of investors surveyed said they’d taken information learned via social media to start a discussion with or choose to work with a particular asset management firm. This is the first work to document this, I’m fairly certain, and the research may open many eyes.”
“Who should pay for the benefit of actives?”
Sophia Grene | Financial Times | ft.com | 3.15.15
“Without the work of analysts, the economy would be inefficient and we would all be worse off.”
“Lionising star managers undermines value of advice”
Jon Cudby | Editor | Money Management | ftadviser.com | 2.20.15
“For as long as I can remember, and especially since the RDR, the investment world has been embroiled in an ongoing ‘active versus passive’ debate. To be honest, I don’t really have a problem with ‘active’ or ‘passive’; it’s the ‘versus’ that rankles.”
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 | investmentnews.com | 2.1.15
“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.”
This week’s Investment Management Roundup highlights a new video where Professor Martijn Cremers talks about active share — a concept we wholeheartedly endorse. Also included are links to articles that tackle diversification, the abundance of overconfidence in the investment industry, and two new papers on why color choice matters in investment management marketing material and getting your ducks in a row as your firm tackles GIPS® updates. Happy reading!
“Professor Martijn Cremers Talks about Active Share”
Touchstone Investments | touchstoneinvestments.com | Video | 1m48sec | 1.20.15
“Active share is a relatively new metric. It measures the proportion of a fund’s portfolio holdings that are different than its relevant benchmark. If a fund is 100% like the benchmark in securities and weights that fund would be deemed to have 0% active share. Conversely, a fund with holdings that differ entirely from the benchmark would be given a score of 100%.
Why is this important? Funds that closely resemble their benchmark will find it difficult, if not impossible, to outperform that benchmark. Finding that fund that has the wherewithal to outperform its benchmark is becoming increasingly difficult.”
Watch the video at: http://bit.ly/1zcEExc