Indexed Products Aren’t All Passive

This week Morningstar Inc. released a report which estimated that as of August, in the United States, assets invested in indexed products (either mutual funds or exchange-traded funds) have now eclipsed that of assets being managed by traditional active stock pickers. In last week’s issue, we looked at debunking the myth that passive investing is…

Bursting The Passive Investing Bubble

This week Bloomberg put out an article focusing on Michael Burry’s criticisms of passive investing and how, in his opinion, it mimics the bubble in synthetic asset-backed collateralized debt obligations prior to the 2008 financial crisis. Burry, one of the protagonists in Michael Lewis’ book “The Big Short” who correctly called the financial market collapse…

Cutting Through the Noise of Financial Media

Given the recent bout of volatility in equity prices, there has been an abundance of financial pundits forecasting the next global recession is surely upon us. Trade war tensions heating up, global economic activity slowing, and yield curves around the globe inverting are the fodder for click-bait style headlines forecasting a sharp decline in equity…

The Surprising Impact of Personality On Investment Management

Despite the fact that quantitative investment strategies are increasing in popularity, there is still a large amount of capital that is being invested by carbon-based asset allocators. Even if a specific strategy exclusively utilizes machine learning and artificial intelligence, there is still a human that is crafting the specifications and building parameters on which the…

The Future of Investment Management

It is no secret that the traditional asset management industry is in the midst of disruption. Advances in technology and the rise of low-cost indexed products has turned the business of investment management on its head. Recently, there has been a distinct trend of consolidation in mid-size asset management, as large entities with more established…

The Role of Psychology in Investment

The argument could be made that prediction is at the heart of every investment decision. At a very high-level, you are providing capital to a company and predicting that you will earn a reasonable rate of return on your investment; however, this is by no means guaranteed. Morgan Housel from the Collaborative Fund wrote a…

Will Value Stocks Rebound?

Last week in Sagacious we featured an opinion piece on the challenges involved in sticking with an investment strategy that has recently been underperforming. This week, the Wall Street Journal published an article that examined the extremely long period of underperformance value stocks have experienced relative to growth stocks. The investment strategy of buying “cheap”…

What to Do in Periods of Underperformance

Underperformance for investment managers is a tricky topic of discussion. When managers acknowledge a period of underperformance, it can be misconstrued by investors as accepting defeat. In reality, it is inevitable that every good investment strategy will experience a period of underperformance. Sticking with a strong investment strategy that is going through a period of…

Are Backtested Results Effective?

One of the key factors influencing the success of raising capital for a new investment strategy is what is known as a “backtest.” When an investment strategy has little to no auditable track record (i.e. the strategy is new or hasn’t launched yet), firms looking to raise capital for an algorithmic or quantitative strategy tend…

The Role of ESG In Investment

Even though it is still too early to determine whether a framework for making investments based on environmental, social, and governance (ESG) considerations is accretive to portfolio performance from purely a return perspective, there is no arguing that ESG policies are becoming an integral part of the investment management process for asset allocators. This article…