Peter Lynch: You Can’t Beat the Market if You Only Index

Barron’s recently profiled legendary investor Peter Lynch with a lengthy retrospective on his humble beginnings, his successful career at Fidelity and highlights from a December interview. Here are some key takeaways from Lynch’s comments on today’s market and the state of active investing: Lynch maintains that the state of active management—with most trailing their benchmarks—isn’t a new phenomenon. He argues that most indexes weight stocks by market value, leaning toward those that have already done… Read More

The Defining Disaster for Blackstone’s Stephen Schwarzman

In his new book What It Takes: Lessons in the Pursuit of Excellence, Blackstone chairman, CEO and co-founder Stephen Schwarzman shares insights from his long career and, specifically, lessons learned from an expensive mistake he made when starting the firm three decades ago. This according to an article in Chief Investment Officer. The 1989 deal was a $330 million leveraged buyout of steel distributor Edgcomb Metals. Schwarzman recalls the internal disagreement about the proposed investment,… Read More

Tracking Fund Performance is Tricky

For mutual fund investors, “persistence is all that matters,” according to a recent article in Barron’s, but decoding performance track records can be a challenge. “Active managers can beat the market,” the article says, “but whether they do so by skill or luck is harder to determine.” The article cites results from S&P’s biannual persistence study, a survey which examines whether funds that have beat their benchmarks or peer groups are likely to continue their… Read More

Morningstar Study: Which Investment Factors Work?

A recent article in Morningstar outlines results of a study the firm conducted on seven investment factors showing that volatility, size and momentum worked best. The article provides the following chart, which depicts each factor’s excess return on a cumulative basis (over 16 years): The article suggests focusing on the patterns illustrated: “The excess-return totals aren’t particularly meaningful,” it says, “because these factors cannot be purchased. They come attached to stocks, which in turn offer… Read More

Ang Warns About Value

BlackRock’s managing director Andrew Ang is urging investors to be cautious in how they return to the long-underperforming value factor, according to a recent article in Institutional Investor. Although several big-name factor investors argue it’s time for investors to buy inexpensive value stocks—including AQR’s Cliff Asness and Research Affiliates founder Rob Arnott—Ang warns to exercise caution, suggesting that some might be tempted to “buy into the value factor simply because it appears inexpensive,” the article… Read More

CalPERS Fires Bulk of Equity Managers

The $380 billion California Public Employees’ Retirement System (CalPERS), the largest in the U.S., has fired most of its external equity managers, cutting their allocation from $33.6 billion to $5.5 billion. This according to a recent article in Chief Investment Officer. The news was reported in an October memo to CalPERS board members that noted only three of the 17 external equity managers survived the cuts and that the move is in response to the… Read More

Oakmark’s Bill Nygren Says Google and Netflix are Value Stocks

A recent Barron’s article shares insights from an interview with the Oakmark Select fund manager and value investor Bill Nygren regarding “the perils of value investing.” Here are highlights from the interview: Nygren attributed his longevity (36 years at Oakmark) to learning the importance of sharing his investment philosophy with colleagues. He explained that his training was based “strongly in business valuation, where you try to identify what a business is worth, and you think… Read More

Lessons From Our Most Read Five Questions Interviews

By Jack Forehand (@practicalquant) We have just passed the one-year mark of our Five Questions interview series. When we first launched the series, I wasn’t sure how it would go. I didn’t know if we could get the types of interesting guests I was hoping for. I also wasn’t sure if I could ask the quality questions it would take to make the interviews interesting (I still am not sure about that). Despite the apprehension… Read More

Research Shows Ideal Team Size for Money Manager

A recent article in CNBC reports that funds managed by three-person teams outperform “solo-run” fund by 58 basis points a year. According to a study conducted by Michael Mauboussin, director of research at BlueMountain Capital Management, “Teams do better than single-managed funds. The best team size is three. The next best is five.” Morningstar data shows that 75% of all actively managed funds are team managed, in contrast to 1992 when 67% of U.S. stock… Read More

Gundlach: Lower Recession Odds and Credit Warnings

Bond manager Jeffrey Gundlach says the odds of a recession are lower and advises investors to avoid corporate debt due to a weaker dollar. This according to an article in Bloomberg. The article reports that after predicting a 75% chance for recession in September, last month Gundlach lowered his forecast to a 35% chance of recession by the end of next year. In a recent webcast, he explained that his view is “based upon consumer… Read More