In Memory of Bill Fouse, Index Fund Pioneer

It is a common misconception that Jack Bogle and Vanguard Group created the first index mutual fund. While Bogle and Vanguard helped to bring index investing to the masses with the first public index mutual fund, it was actually William Fouse at Wells Fargo in the early 1970s that launched the first index fund marketed…

Are There Ever Good Behavioural Biases?

Behavioural biases and the effect of human psychology on rational decision making is a topic often discussed in investment management. Both retail and institutional investors are impacted by their psychological wiring, but most of the time the discussion centers around how investors can mitigate the impact of negative behavioural biases on their investment decision making….

The (Mis) Behaviour of Markets

As any investor will know, there are no defined set of rules in financial markets; investment management is a far cry from a hard science where normal distributions and other statistical methods work well. While it’s common knowledge that many concepts in modern finance have massive shortcomings (e.g. Markowitz’s modern portfolio theory and the efficient…

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 Moral Animal – Why We Are The Way We Are

For those interested in human psychology and how evolutionary forces can influence the way individuals make decisions, The Moral Animal – Why We Are The Way We Are by Robert Wright is a fascinating read. It explores the science of evolutionary psychology, examining the historical context around how the theory of natural selection was conceptualized…

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…