Marie Beerens

New Whitepaper from Caron's Corner: In this paper we discuss new management techniques required to capture higher returns in a higher inflation regime. A new market regime is upon us catalyzed by rising inflation risks. This presents a challenge to investors seeking to compound returns at target levels with stability because it increases correlation risks. Effectively, it pushes the efficient frontier inwards and reduces risk-adjusted return potential. In this paper, we explain how we counter this adverse impact to returns in this new regime through a new management approach with the goal of achieving stable target returns. https://mgstn.ly/3QNuw0f

29

Six years ago, I published a historical contextualization of Modern Portfolio Theory. It was a constructive criticism of how MPT is used today. The argument ended by outlining an alternative approach to portfolio management based on income streams, not asset prices. The response was near total silence. In contrast, my most recent book has gotten substantial traction in the media and the practitioner community. The topics of the two works are, of course, different, but I think that there are other reasons why one has done well and the other has not. First, in 2018, interest rates were still going down, the market was still going up, and the early cracks in the global neo-liberal paradigm had not yet signaled a definitive end to the unfettered march of capital. Why rock the boat. Everything was fine. And a portfolio approach based on income streams didn’t make much sense when there were no income streams to be had, just ever-rising asset prices. Second, I had no platform. That was one publisher’s explanation for the flop. Without social media, there could be no marketing. The tree fell in the forest and no one heard it. I will also acknowledge a third possibility—that the earlier work just wasn’t very good. But I don’t think the third explanation is so. And the conditions surrounding the first two reasons have now changed. Interest rates have stopped going down. And traditional portfolio theory has taken it on the chin the past few years without the tailwind of declining rates. It now makes sense to at least consider alternative approaches to portfolio construction, including those based on once-again material income streams. And, for better or for worse, I’ve spent the past half decade building up a modest social media presence to propagate my sins. HistoryInvestor finally has a platform, albeit not the largest or the loudest. So I’d ask you to take a look at Getting Back to Business. ( https://lnkd.in/eTCimJvn) Let me know what you think of it. And I want to thank the few, the brave who did note it at the time. They include Sean Wieland, CEPA, Jan van Eck, Tariq Dennison TEP, Marty Fridson, among a handful of others. (If I have overlooked you, please remind me and I will happily add you to the list.) And thanks to the then editors at McGraw-Hill Professional, Noah Schwartzberg & Donya Dickerson, who got the book over the finish line. They have both since moved on, but I hope their earlier efforts will not ultimately have been in vain.

28

2 Comments

It was great to spend some time chatting with Rory Palmer, Debra Slabber, CFA and Glen Mukheibir CFP® on the current challenges faced by asset allocators. Thanks to Asset TV for giving us an opportunity to talk about our approach to managing global equity strategies. We discussed the dynamic investment process we have developed in the Systematic Equities team here at Jupiter Asset Management, and how that could be a useful core equities building block for asset allocators in navigating these uncertain times. #JupiterSystematic #GlobalEquities #OldMutual #OldMutualWealth #OMIG

31

2 Comments

Winter weather in June getting you down? Well, maybe an optimistic take on Iceland‘s upside inflation surprise in May can lift your spirits. Icelandic inflation came in at 6.2% in May, two decimals above the consensus forecast for 6.0%. Many analysts and policymakers have lamented that the uptick in inflation was “broad based“ and speculated that this may be an early sign of price hikes following wage increases in Collective Labour Agreements signed in March. I have a slightly different take. Yes, the uptick was broad-based in terms of *product categories*, but in terms of *pricing dynamics* it was actually entirely concentrated in imported goods, which saw a very unusual drop in prices in April reverse out, and in air fares, which tend to be volatile and have very limited signal-to-noise. I don‘t know that either of those are reason for concern. As my clients are well aware after the number of notes I‘ve written on this, I think the most relevant signal for the underlying progress on disinflation in Iceland right now are the prices of market determined domestic goods and services ex-air fares. They constitute a third of excess inflation at the moment, are not distorted by volcanic effects in the same way shelter prices are, and are most sensitive to labour cost increases and domestic price pressures more generally, as they tend to be non-traded.   On this measure, disinflation actually continued in May, slowing from 5.9% to 5.8%.   That‘s not to say I‘m not concerned about inflation. Even my preferred measure is showing a slower pace of disinflation than during the first four months of the year, which doesn't entirely preclude that some firms have started passing on labour cost increases. And to be clear, wage growth is still running too hot for comfort and inflation expectations are elevated, both of which suggest that getting inflation down to target is going to be long and arduous.   But until we see domestic prices hit a real bump in the road, I hesitate to worry we're going off track.

24

A good check on your own asset allocation assumptions. The following are the implied volatilities of various strategy/departments at CPP Investments | Investissements RPC based on converting 95% VaR to a Volatility using 1.65x factor from the Normal Distribution (as bad as that may be, especially for Credit portfolios). - Real Assets 13% ($30/$137/1.65) - Private Equity 20% ($52/$156/1.65) - Credit 9.9% [ex Govt+IG] ($11/$67.7/1.65) - Total Fund Mgmt 8.6% [effectively a passive 60/40] ($38/$267/1.65)

15

1 Comment

As spread between ISM Manufacturing new orders and employment (blue) has rebounded from cycle low, productivity growth (orange) has continued to improve

14

An internal barometer that serves to measure and provide a real-time snapshot of factors correlated to economic/liquidity/credit spreads has thus far failed to confirm the recent new highs in S&P 500. The intention behind this barometer is to measure key factors regarding the economy as well as liquidity and credit conditions. Thus, its failure to make a new high SOON may well prove to be a cautionary omen for the market, in time! (6/17/24)

3

"Asset Pricing with Cognitive Biases and Deep Learning": "Biased expectations can explain two central puzzles in the asset pricing literature: the equity premium puzzle and the excess volatility puzzle." https://lnkd.in/euFNTFM7

25

Soft landing or no-landing? There are certainly a lot of aeronautical metaphors being used to describe the economic outlook at the moment! Ahead of today's crucial US CPI data, watch Felix Feather outline why leading indicators are still pointing to inflation moderating over the course of this year as a whole - but also why there are several important risks to that baseline expectation. #inflation #abrdn PS - for a super-nerdy deep-dive into the topic of physics metaphors in market-macro, check out this paper from myself and Luke Bartholomew from 2020 on "stall speed and escape velocity" https://lnkd.in/eUr5QzVs

27

YOU CAN'T FIGHT THE FED - BUT YOU DON'T HAVE TO LISTEN EITHER The Fed spoke yesterday, putting the no-hikes scenario is firmly on the table. But it's changed direction too often lately. It is clear, that the FOMC is NOT ahead of the curve. For that, look to Janet Yellen. My full interview at Bloomberg News #markets #Fed #interestrates #economy https://lnkd.in/d2cAzQhV

78

2 Comments

April 2024: Summary of CLO Research Insights The equity performance of redeemed EU #CLO deals since October 2023 stands out, with the average deal registering a 16.5% IRR. However, the IRR metric has been skewed by the solid performance of redeemed deals from the 2022 and 2023 vintages.

6

Always insightful discussions with @OJRenick on @SchwabNetwork. Remember, ONE DATA POINT IS NOT ENOUGH to prompt an early #FOMC rate cut. Caution regarding market pricing of #rate #cuts is advised after just one decent CPI reading. The Fed will closely monitor the credibility of seemingly tight labor markets. Potential inflationary pressures might be significantly lower than suggested by the average 294K payroll growth since January. The household survey indicates only an average of 94K monthly employment growth, indicating a trend of individuals holding multiple jobs! Stay informed. #MilkenInstitute

6

1 Comment

Input costs are rising but output prices (for manufacturing) and prices charged (for services) have moderated per S&P Global U.S. PMIs

11

1 Comment

New or smaller VC, PE or HF manager? AUM less than $50 million? Great Performance? Trying to raise assets? Struggling and failing?   Sounds all too familiar: It’s due to poor or non-existent marketing Let’s get real about raising assets for “sub-institutional” managers, those with AUM between $0 and $50 million. IT’S HARD AND A STRUGGLE.   Raising assets in a crowded, hyper-competitive, complex and complicated market from investors that are risk averse, stringently selective and idiosyncratically demanding is more challenging and difficult than most new and sub-institutional managers understand. The fact is the majority of sub-institutional managers fail to get AUM beyond personal capital long with small amounts from family and friends even when they have exceptional performance. Plainly speaking: There is a lot of BS, hype, propaganda and completely wrong information about marketing and fundraising for small managers with AUM less than $50 million Since 2011, Johnson & Company has specialized in meeting the marketing challenges for "sub-institutional" managers. 25+ years experience, expertise and skill uniquely equips a new or smaller manager with the FACTS and proven structured, disciplined and focused PROCESS supported by independent high-integrity data and research, accurate information, objective insight, expert instruction and frontline intelligence that optimizes marketing process execution to maximize the success, efficiency, economy, expedience and effectiveness of raising assets. If you’re a new or smaller manager, with AUM less than $50 million struggling and failing to raise assets, first get the facts: https://johnsn.com/facts If after your review of the “FACTS”, you’d like a candid, no-nonsense conversation about marketing and raising assets, contact me, I welcome the opportunity. bryan@johnsn.com

7

A gentle reminder to myself about value investing. When I first started, I was very focused on Book Value and making sure that I only invested in companies BELOW book value. This is commonly known as Price to Book as a valuation metric. Credit Suisse reported a Tangible Book Value of CHF10.60 at year-end. CS had a pretty good franchise: a valuable wealth management business and decent investment banking operations. So we are not talking about a run of the mill company. It was available for investment BELOW book TANGIBLE (not even accounting book value) book value for a long time, which would have appeared to be a slam dunk! Well, as we all know, CS was ultimately sold at CHF 0.50 per share. So much for book value! Lessons: - Don't look at book value as a standalone measure - Don't ignore leverage - Make sure the business is earning CONSISTENTLY AND SUSTANABABLY (high enough) ROIC blessings #The5000 #Money #Invest #BiblicalFinance #10X10Y #100X20Y

13

1 Comment

BMO SIA FOCUS NORTH AMER EQUITY ETF & BROADCOM INC. ZFN.to #ETF units are up 22.6% Year to Date, compared with a gain of 13.92% for the S&P 500 Index and a gain of 3.53% for the S&P/TSX Composite Index so far in 2024. At the end of May, the largest weighted sectors within the fund were Information Technology, Industrials, Consumer Discretionary and Energy. Today’s featured holding, Broadcom* Ltd. (AVGO) has been consistently held in the fund since January of 2023. It has been in the news this week around the announcements of quarterly earnings and a 10 for 1 stock split. Click the link for full report: https://lnkd.in/gJQREw3P

1

1 Comment

#familyoffices #UHNI #Wealthmanagement #generationalwealth If you think your wealth can last for generations, you must read this article from CFA institute The author shows a mathematical formula of variables that impact your generational wealth. Mostly impacted by the lifestyle and family’s investment choices. The variables that impact your generational wealth are based on ·      Amount of heritage received ·      Number of heirs to split the wealth ·      Number of years of accumulation ·      Annual affluent’s expenditure, as a % of his family income ·      Divorce rate among affluents and, therefore, wealth split in the process and ·      Wealth tax The most important aspect is how you ensure that growth in your investment exceeds the values of lifestyle expenses and the split of wealth. Putting the investments and the business in that direction can significantly strengthen the creation of strong generational wealth. Talk to us about the global best practices that we bring in while we help our clients to set up their family offices.

4

I get to meet with a lot of managers of different strategies. Often I meet with ETF providers that provide passive management, and private asset managers that provide access to more nuanced solutions. When I meet with a manager who offers private asset solutions the conversation steers towards institutional clients and their weighting to private assets. Private assets can and do have a place in portfolios, but individual clients cannot be treated like institutions. Retail investors have biases, tax consequences, time horizons, liquidity requirements, etc that institutional investors aren’t exposed to.  In recent years, there's been a growing trend suggesting that individual investors should mimic institutional strategies by allocating more to private assets. While this might seem like sound advice on the surface, the reality is that there is a lot more to consider. Jarrod Wilcox, CFA, Jeffrey E. Horvitz, and Dan diBartolomeo, in their paper “Investment Management for Taxable Private Investors” (CFA Institute, 2006), highlight the significant differences between institutional and private investors: 1. Diverse Needs and Customization:   - Private investors have diverse goals, risk tolerances, and tax situations. The need for personalized investment strategies is critical. 2. Tax Complexity:   - Taxation significantly impacts private investment strategies. Effective after-tax performance requires a strong knowledge of tax-efficient investments. Taxes can be one of the biggest detriments to investment performance over time.  3. Broader Fiduciary Responsibilities:   - Advisors to private investors must go beyond selecting suitable securities. They need to educate clients, manage broader financial planning, and provide proactive fiduciary care. Private investors often require more comprehensive guidance compared to institutional clients. 4. Organizational Challenges:   - Providing customized investment services to a diverse client base is costly and complex.    5. Lifecycle Investing:   - Investment strategies should evolve with an investor's life stages and wealth levels. Younger investors with fewer resources may need to be more conservative, while wealthy retirees might benefit from more aggressive strategies. I found this particularly interesting as most textbooks encourage risk-taking when you’re younger and becoming more conservative as you age.     I would also add liquidity here. The ability to redeem investments on time is very important for retail investors. They simply do not have infinite hold periods like a foundation or endowment might. Institutional investment strategies are attractive however, individual investors must navigate a more intricate financial landscape. Personalized advice, tax management, and adaptive strategies are important for optimizing private wealth. This is where a good financial planner earns their fees. #Investing #WealthManagement #FinancialPlanning #PrivateInvestors #TaxStrategy

79

13 Comments