There is healthy demand among global investors for reliable and transparent indices and benchmarks to gauge sector-level and overall market performance. This demand coincides with investors seeking out cost-efficient investment strategies and shifting their asset allocations to lower-cost passive or index-based products, such as exchange-traded funds (ETFs), from actively managed funds. In India alone, passive Read more […]
Evaluating active managers’ performance through a risk lens is rooted in modern portfolio theory (MPT), which states that the expectation of returns must be accompanied by risk—the variation (or volatility) around the expected return. MPT assumes that higher risk should be compensated, on average, by higher returns. Institutional investors tend to be interested in risk-adjusted Read more […]
In a recent study published in the Financial Analysts Journal, Ang, Madhavan, and Sobczyk (2017)[1] highlighted that using regression-based factor loadings to measure managers’ factor exposures, even when conducted on a rolling basis, can be misleading due to excessively smoothed coefficients, given that active managers adjust their exposures dynamically. The authors argued that holdings-based attribution Read more […]
Here are some recent headlines about the consequences of passive investing: Japan Central Bank’s ETF Shopping Spree Is Becoming a Worry Passive Market Share to Overtake Active in the US No Later than 2024 Passive investing boom is creating a ‘frightening’ risk for markets ETFs are taking over the world, and there’s nothing anyone can Read more […]
There are generally two types of dividend strategies: Dividend growers: Those targeting stocks that consistently grow their dividends over time High dividend yielders: Those focusing on stocks that pay a high dividend yield Not all dividend strategies are created equal These dividend strategies are constructed differently and may be used to accomplish different objectives. For Read more […]
Active management, success always? As we discussed before, the success of active management is directly related to its outperformance of the benchmark it is comparing itself with. In order to ensure consistency, active managers are reluctant to deviate from standards that include this comparison. This leads them into situations where they may have to hold Read more […]
Indexing is certainly not a myth, and while active investing is a popular reality in Indian markets, we are seeing the slow and steady rise of indexed products. In a recent article, John C. Bogle, the founder of Vanguard Group, said, “We are in the middle of a revolution led by indexing.”[1] John C. Bogle’s Read more […]
Global events this year have been transitional in nature, signaling change. Examples of significant developments include the result of the Brexit vote, with the UK officially set to leave the EU and the new Prime Minister, Theresa May, preparing for upcoming changes, as well as the 58th U.S. Presidential election, which is empowering electors to Read more […]
Historically, three-year rolling returns have revealed consistent outperformance from the S&P 500® Dividend Aristocrats® Index, which is composed of quality companies with at least 25 consecutive years of dividend growth. Why look at rolling returns? Rolling returns offer a more robust way to show performance than traditional one-, three-, five- and ten-year trailing returns. Rolling Read more […]
Within the passive investment arena, smart beta strategies have witnessed a substantial growth in assets, and there is now a swathe of such strategies in the marketplace, many of which bear similar names and share similar objectives. One may therefore expect that all these strategies are similar and that any differences would only elicit interest Read more […]
