Next Week’s FOMC Decision A Watershed Event? High Yield Doesn’t Seem To Think So.

Unlike Treasuries and investment grade corporates, the high yield market as measured by the S&P U.S. Issued High Yield Corporate Bond Index touch a low point for yield earlier in the month at a 5.87% on October 6th.  This market was in the process of selling off and had a yield of 6.51% on October 15th, up 65 basis points from the 6th and 38-basis point higher than the 6.13% start to the month.   High yield’s reaction posts October 15th was “risk on” as yields since then moved 60 basis Read more [...]

The VIX Takes a Hairpin Turn

I have a neighbor who is cooler than me. He is braver than me. He also has more expansive and expensive medical and auto insurance than I do. How do I know all this? Well, he races street motorcycles. The other day I asked him what was the fastest he had ever gone. His answer: "Very fast, but that's not where the thrill is. The adrenaline rush comes from handling and powering through the curves." The movements in the CBOE Volatility Index (VIX) the past few weeks have made me reflect on this Read more [...]

The Great Barrier To Commodities Down Under

This week I am in Australia meeting with investors about commodities.  Usually when I visit a heavy natural resource producing country, the conversations flow easily since the locals understand commodities.  We have been discussing farms, coal, iron ore and tin - subjects that engulf the culture of the locals.  The Australians seem to know all about the public companies and private deals and are comfortable about the commodity exposure in their portfolio via their stock market, the S&P ASX Read more [...]

Dim Sum – What is on the Menu?

As tracked by the S&P/DB ORBIT Index, the size of the offshore renminbi bond market rose 66% year-to-date (YTD) and reached CNY 280 billion*, which reflected the robust supply in 2014. And if we look at the index exposure by issue year, the new issues in 2014 represent 53% of the index. Exhibit 1: Index Exposure by Issue Year: The S&P/DB ORBIT Index While it is not surprising to see the index is dominated by Chinese issuers at 89%, there is a continuous trend of country diversification Read more [...]

Active vs. Passive: How to keep score of the ongoing debate

At the heart of the active versus passive management debate lays the theoretical underpinning that the average return of both actively and passively managed assets must equal the aggregate market, thereby making it a zero-sum game. Since the costs of active management typically exceed those of passive management, the average actively managed dollar will underperform the average passively managed dollar after accounting for costs (Sharpe 1991). Over the past few decades, this debate has inspired many Read more [...]

Gold: Its History and Recent Trends

During festivals such as Diwali, the demand for gold in India increases because it is considered auspicious.  Traditionally, people invested in physical gold bars, coins and jewelry.  However, after the introduction of the gold ETF, the option to invest in gold also became popular.  There was a huge growth in the assets under management for gold ETFs compared with ETFs in other asset classes. Investors purchased gold as a way to preserve value and hedge against inflation and recession.  Gold Read more [...]

A Lesson in Last Week’s Turmoil

The market action in US stocks and Treasuries last week, especially on Wednesday, may be an experience that many investors would like to forget.  On Wednesday volume in US treasuries set a record as yields collapsed, stocks nose-dived and VIX topped 30 after opening the week at about 20.  As horrifying, or exciting, as it was, there may be lessons buried in the numbers. Rarely does one specific event cause this kind of market turmoil; rather many sources of investor anxiety crowd together.  Read more [...]

REITs – A Mature Asset Class in the U.S. and Growing Interest Globally

Over the past two decades, real estate investment trusts (REITs) have emerged as a popular and efficient way for investors of all stripes to access the real estate asset class. Strong long-term total returns, combined with other key investment characteristics such as liquidity, high dividend yields, their potential to increase diversification and to hedge against inflation have contributed to the appeal of REITs. Source: S&P Dow Jones Indices LLC; Barclays Capital. Data as of Sept. 30, 2014. Read more [...]

Colombia — Innovation in Indexing

If the world were a simpler place, we would have one index per market. However, this is far from the case. Markets have multiple indices, and deciding which index provides the best exposure is no easy feat. This is especially true in developing markets like Colombia, where multiple indices are jockeying to be the “market benchmark.” Looking back at the early days of indexing, the formula for the Dow Jones Industrial Average (DJI) was as simple as aggregating the prices of the largest stocks Read more [...]

A Quick Look at SPIVA India

The SPIVA India Scorecard reports on the performance of actively managed Indian mutual funds versus that of their benchmarks, showing equal-weighted peer averages.  The mid-year 2014 scorecard, the latest SPIVA India report, has revealed that while active funds may be able to outperform their benchmarks in the short term, it becomes more likely for active funds to be outperformed by their benchmarks over the three- and five-year periods. Some of the key findings from the report including Read more [...]