How History Informs the Valuation Discussion

In a recent article for Fortune, Ben Carlson writes, ”Market valuations are an important input into the investing process. But the relationship between the markets and valuations is far from perfect and requires context when thinking about what sky-high valuations mean for today’s investor.” According to Carlson, according to data going back to 1945, a case could be made that the current market pricing should be even higher given the low level of interest rates:… Read More

The Value Versus Growth Investing Debate Continues

Although the value strategy has fallen on hard times for the past 12 years causing many to question whether it still works, historical data shows that the value advantage exists. This according to an article in Forbes. The article offers the following chart by financial advisory firm Dimensional: The article states, “This chart illustrates that although the ten years from 2006-2015, 2007-2016, and 2008-2017 have been some of the worst decades for Value investing, the… Read More

GMO’s Montier: Bearish on Stocks but Bullish on Monetary Theory

In a recent interview with Barron‘s, GMO strategist James Montier shared his concerns about the U.S. stock market and his bullish view on modern monetary theory (MMT), which he has found to be “good model for governments’ interactions with the market.” Here are some highlights: Montier breaks MMT down into the following components: “Money exists because it’s created by the state. The U.S. dollar has value because you have to pay taxes in it.” “If… Read More

Private Equity: Bigger Funds Not Necessarily Better

Private equity firms are raising increasingly bigger funds, but they don’t necessarily deliver bigger returns. This according to a recent article in The Wall Street Journal. “The rise of megafunds reflects the growing demand for private equity from large investors such as sovereign-wealth funds with hundreds of millions of dollars to put to work,” the article explains, adding that persistently low interest rates, private equity’s reputation for double-digit returns is enticing, even if it means… Read More

Winton’s David Harding Offers Insights on Quant Investing

In an interview with Bloomberg earlier this year, Winton Capital Management founder and quantitative investing pioneer David Harding offered insights on the challenges faced by today’s quants, the competitive environment and the search for new strategies. Here are some highlights: Systematic strategies have become crowded according to Harding: “With low to zero interest rates, its tough to make money in the hedge fund game at the moment.” However, he added, “that’s what leads to innovation.… Read More

Six Common Misconceptions About Factor-Based Strategies

By Jack Forehand, CFA (@practicalquant) Factor strategies have grown exponentially in the past decade. Almost every major asset manager now offers their variation of things like value, momentum, quality, and low volatility, and each of them has their case as to why their approach is better than the others. But at their core, all these strategies rely on one basic principle – that if you invest using factors, you will earn an excess return over… Read More

It’s a Great Time to Be an Active Manager

One prominent asset manager says that dominated of today’s market by passive funds and quantitative strategies is creating opportunities for his actively managed funds. This according to an article inInstitutional Investor. Warrren Koontz, head of value equity for Jennison Associates (the $176 billion fundamental fixed income and equity manager for PGIM), said, “There’s no better time to be an active manager than now—and it’s even more dramatic in the value space.” He explained that his… Read More

Ray Dalio on Unpredictability of Markets

The recent news that Bridgewater Associates’ flagship fund—the Pure Alpha fund—lost 4.9% in the first half of this year should underscore the unpredictability of markets, according to a recent article inBloomberg. The article cites the performance of the SPDR SSgA Global Allocation ETF, which tracks the broader markets and was up 12% for the year (as of July 19th). The article notes two takeaways: ·      “The globalization of the world economy in recent years means that… Read More

Stock Rally Causing Look-Alike Portfolios

A study by Bank of America Merrill Lynch found an overlap in the top 50 stock holdings among mutual funds and hedge funds. This according to an article inThe Wall Street Journal. Citing Bernstein data, the article reports that the most crowded trades included Amazon, Microsoft, Mastercard, Abbott Laboratories and PayPal. “Investors are drawn to stocks that have performed well and risen fast,” the article reports. At the same time, it adds, “few are willing… Read More

The Gains and Losses Associated with Locking Up Money

In a recent article for The Wall Street Journal, columnist Jason Zweig discusses the pros and cons of a newly proposed fund called the “Forever Fund” in which investors would lock up money for at least 10 years. The fund idea—still only a “thought experiment”–was created by Cambria Investment Management executive Meb Faber who, writes Zweig, wants investors to take a longer-term view “in a world of itchy-fingered traders.” “While I’m a fan of the… Read More