The world of investing and business has seen a great deal of change in the past 30 years. This report shares thoughts on the ten attributes of great fundamental investors. Accounting is the language of business and you need to understand it to appreciate economic value and to assess competitive positioning. Investors face a slew of psychological challenges. Perhaps the most difficult is updating beliefs when new information arrives. Position sizing and portfolio construction still do not get the attention they warrant. The substantial shift from active to passive management has profound implications for the investment industry.
Category Archives: Credit
ESG Integration for the Masses
Historically, ESG indices have not attracted asset volumes comparable to smart beta index strategies. This could be attributed to the fact that market participants and academics alike have struggled to link ESG-based strategies with financial performance.
As researchers shift their focus from how to study ESG to how to integrate ESG data into products and indices, two key issues related with integrating ESG data have come to light that may be the reason some market participants investors have held back from taking the plunge.
Managing risk in the real world with Nassim Taleb
We are principally practitioners, which entails a much, much more rigorous approach to risk. Academics love theories, but science isn’t about risk and survival but about what can be proved using a certain set of methods. What cannot be proved is left out. Put the science where it belongs and know the limits of science beforehand. There are many areas where we take decisions where science cannot help, so it is foolish and unscientific to be scientific about these things rather than using precautionary heuristics. Our job is to formalise a set of rules and heuristics with clearly defined things. Before silent risk, nobody tried the Bourbaki-style to formalise risk management by making everything clearly and explicitly defined and stating what can and what cannot be captured by “models” and what a payoff means. Risk is not science, it is not practice, it is not probability, it is not economics, it is not statistics. Risk is risk, a discipline on its own, with its own rigor. As a discipline it is formalisation. Read more
MSCI – WHAT MATTERS FOR INVESTORS IN THE LONG RUN
Investors who aim to understand what drives returns over the long run might look to the Land of the Midnight Sun.
What are the main sources of return for equity investors who measure their horizon in decades? If you hold securities over the short term, say, for a year, valuation changes matter a lot. But over much longer periods, up to 20 years, the picture changes dramatically, notes Remy Briand, head of research, whose latest post discusses an analysis that MSCI performed on behalf of the Ministry of Finance of Norway.
Investors ‘warming’ to alternative ways of viewing portfolios – survey
Institutional investors may be warming to approaches beyond traditional asset class-based allocation regimes, with many also turning to factor or objective-based alternative investment models, according to a survey commissioned by State Street Global Advisors.
Conducted in the second half of last year, the survey was of senior executives with asset allocation responsibilities at 400 large institutional investors from around the world. It focused on investors’ objectives, their approach to asset allocation and their framework for measuring success.
S&P : Global Aging 2016: 58 Shades Of Gray
S&P Global ratings has recently published its latest Global Aging Report: 58 Shades Of Grey. The study found that in a scenario in which governments took no further measures to plan for aging populations, median net general government debt would rise by 2050 to above 130% of GDP from 43% currently.
The report also includes simulations of long-term sovereign ratings and credit metrics under the following scenarios:
•The “No Policy Change” scenario, in which nations take no further measures to plan for aging populations;
•The “Balanced-Budget” scenario, in which budgetary adjustments result in a balanced budget in 2019 for all sovereigns;
•The “No Aging” scenario, in which government legislation fully contains future increases in age-related spending over the projection period;
•The “Lower Interest Rate” scenario, in which a 2% interest rate prevails over the study period rather than 3% in the no-policy-change scenario.
•The “Higher GDP Growth” scenario, in which GDP growth is increased by 1% across the projection period.
Top 100 global investors 2016
The top 100 global investors are ranked by size of real estate assets under management at the end of 2015. Numbers are calculated by S&P Global’s MMD and IPE
Asset Allocation: Saying no to infrastructure
Norway has bucked the trend and decided against moving its sovereign wealth fund into unlisted infrastructure. Rachel Fixsen investigates why
Norway’s decision to keep unlisted infrastructure out of its sovereign wealth fund (SWF) has raised questions about the investment case for the asset class.
At the beginning of April, the Norwegian Ministry of Finance declared that it would not permit unlisted infrastructure investments in the SWF because the potential benefits were unclear. The Government Pension Fund consists of the former oil fund, the NOK7.47trn (€802bn) Government Pension Fund Global (GPFG), and the much smaller, domestically-orientated NOK198bn Government Pension Fund Norway (GPFN).
Ravi Menon: China at an inflection point – what does it mean for Asia?
Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Official Monetary and Financial Institutions Forum (OMFIF) City Lecture, London, 5 May 2016.
Weathering Global Chaos
Weathering Global Chaos
The current El Niño is one of the worst on record, wreaking havoc across the globe. It’s helped deliver everything from the Canadian wildfire to rising food prices. With La Niña potentially around the corner, I point out that high food prices often coincide with social unrest. Read my piece here.
AIWMI KNOWLEDGE EXCHANGE 