Tag Archives: passive management

Bond Funds Unbound

Yesterday’s Wall Street Journal offered a profile of fixed income investors who aim to “break [the] chains” by which they are supposedly confined by index benchmarks. As the bond market falters, investors are seeking shelter in funds that aren’t tied to indexes.  These bonds funds are known as “unconstrained,” “go-anywhere,” “absolute return” or “flexible” funds, Read more […]

Passively Active: A Passage to India

Globally, over 6 billion U.S. dollars are invested in India Equity ETFs, although less than 200 million via products listed in India.  It’s reasonable to suppose that Indian demand is reflected in the local figures, transferring wealth across Indian borders is both difficult and expensive.  Thus, on the face of it, these figures suggest general Read more […]

Coming Soon to a Dictionary Near You

It may have been 30 years ago, in the early days of stock index futures, that the verb “equitize” (and its cognate noun, “equitization“) came into relatively common use.  The term, if Dr. Johnson will forgive me, meant “to provide equity returns without purchasing equity securities.”  Typically this was accomplished by buying S&P 500 futures — if I Read more […]

How Much Popularity Can Low Volatility Stand?

The low volatility anomaly — i.e., the tendency for low-volatility or low-beta portfolios to outperform market averages — has been the subject of at least 40 years of academic research.  Given its challenge to what “everyone knows” about risk and return, it’s a fertile field for both professors and practitioners, some of whom recently characterized Read more […]

Stock Picker’s Market?

This morning’s Wall Street Journal cites an adviser who opines that “the current stock market environment favors…active fund managers, who pick individual stocks in an attempt to beat broad market indices.”  This immediately raises the question of how to define a stock picker’s market, and how to determine whether today’s conditions are more auspicious for Read more […]

A Simple Hedge Strategy

Alternative investments for high net worth investors are like the weather — everyone talks about it, but no one does anything about it.  In fairness, alternative investments — hedge funds, private equity, and the like — are often hard to access and complicated to explain.  But if they can deliver on their promise of uncorrelated Read more […]

The Shrinking Supply of Alpha

Recently we attended a conference at which many hedge fund representatives were present. Not surprisingly, there was much discussion of the ability of hedge funds, and by extension active managers generally, to generate alpha. This raises an obvious question: what is the market’s capacity to produce alpha?  Is there a natural limit to investors’ ability Read more […]

Beta, Smart and Dumb

The idea of “smart beta” is gaining increased acceptance, although not without some controversy.  I have to confess that I really dislike the term “smart beta,” and not just because I didn’t invent it.  “Alternative beta” I can live with, or “factor” indices, or “strategy” indices — but “smart” beta leaves me cold. Which is Read more […]

The Fox and the Hedgehog

The ancient Greeks tell the story of the fox and the hedgehog.  The fox, it is said, knows many things, but the hedgehog knows one big thing. Anyone who reads the Wall Street Journal or listens to CNBC will recognize the vulpine nature of much of the financial world.  One key to investment success is Read more […]

When Diversification Fails

Diversification means different things in different contexts.  We can speak, for example, of diversification within an equity portfolio — i.e., of holding a number of stocks with potentially-offsetting risks, as opposed to concentrating on only one issue or on a handful of similar stocks.  Or we can think of diversification across asset classes — e.g., Read more […]