Author: Anu Heda

Best Blogs of the Week #263

Posted by Anu Heda on Mar 13, 2017, in Best Blogs of the Week , tagged with AB, Van Eck, WisdomTree

Three robust posts from the last two weeks. The quality of charts in asset manager blog posts is dramatically improving as seen in all three posts. I want include the Van Eck and WisdomTree posts not only for the salient point each makes, also to show how product marketing is infiltrating some blogs. It’s an interesting trend occurring at a few of the firms we follow.

AB – Evaluating the Trump Effect on Global Equities – focusing a lens on potential policy outcomes is an increasingly important component for isolating select investment candidates that could deliver solid returns in highly unpredictable times.

Van Eck – Follow the Flows: Active versus Passive – For the three year period ending January 31, 2017, passively managed funds have attracted over $1.4 trillion of new assets according to Morningstar. In that same period, actively managed funds have experienced net outflows of $475 billion.

WisdomTree – An Asset Allocation Study for a Moderate Portfolio – or those willing to alter asset allocations, we believe a continuous improvement in returns per unit of risk could be realized.

robust chart

Best Blogs of the Week #262

Posted by Anu Heda on Feb 27, 2017, in Best Blogs of the Week , tagged with Franklin Templeton, William Blair

Only two posts this week (focused on inflation) and one question.

Franklin Templeton – K2 Advisors : Why We Like Activist Hedge Strategies – It could be said that activist managers in some ways represent the only strategy that generates alpha to some degree. While not always successful, activist funds seek to unlock “hidden” value in the companies they invest in.

William Blair – The Impact of Inflation – In other words, bonds were behaving more like equities. Now that inflation is becoming more apparent, I believe that repricing in the bond market has only just begun.

inflation

Question – do you think this chart proves that ETFs do not cause volatility? It seems to mash two things: ETFs are popular and volatility is low to make a point about causes of volatility. What do you think?

Best Blogs of the Week #261

Posted by Anu Heda on Feb 20, 2017, in Best Blogs of the Week , tagged with aberdeen, BlackRock, William Blair

Quality posts from the last two weeks, led by a captivating post on trade wars.

Aberdeen – Week in review: The return of inflation – Inflation is back. Figures released this week on both sides of the Atlantic painted a picture of rising prices – and the possibility of an end to the days of ultra-low price increases. The UK’s consumer prices index was 1.8% in January – its highest level since June 2014.

BlackRock – Will tax reform hurt tax-exempt bonds? – By our estimates, the market might need to offer some 15 basis points (front end) to 50 basis points (long end) in higher yield to compensate for the reduced tax benefit.

William Blair – Trade Wars: Is Trump Bluffing? – The key is he put a lot of things forward. It creates uncertainty for trade and we don’t know how far he’ll push the actual negotiations, especially with respect to China. This uncertainty will need to be considered when building a portfolio.

ETF Issuers and the Missed Education Opportunity

Posted by Anu Heda on Feb 20, 2017, in Thoughts , tagged with BlackRock, SSGA, Vanguard, WisdomTree

In January, Ignites published a piece titled “AQR Second to Vanguard in Active Flows” (subscription required). The primary points orbit active fund flows. What caught my eye was a link to 2016 passive and active fund flows from Morningstar. From their data, only 6% of passive ETF fund flows ($31.5B) went to issuers outside the top five (Vanguard, BlackRock, SSgA, Fidelity, and DFA). That means 120 ETF issuers split $31.5B (issuer list via etfdb). Seems like a massive issuer group sharing a small slice of the ETF flow pie. What types of products do these issuers provide?

To learn more, I sifted through issuer lists and AUM data. Many of the issuers offer leveraged or inverse ETFs (Direxion, ProFunds) while others have thematic ETFs (GlobalX, VelocityShares). To focus my research, I searched for ETFs with investment strategies classified as “alternatives.” Here’s a list of the top 25 alternatives ETFs (image to the right). Only one comes from BlackRock, SSgA, or Vanguard (it’s from SSgA). To support alternative products, issuers need to educate prospective buyers. That’s basic communication strategy. So, I studied the Web sites of the four firms with the 5 largest alternative ETFs: 2 from IndexIQ (now part of New York Life by way of MainStay), WisdomTree, First Trust, and Hull Capital. None of them highlight education on their homepages or product profiles. Rather, they model their sites off of traditional active managers with promotions of thought leadership (2017 Outlook, anyone?), product, and firm.

I think that’s a massive mistake. Focus on education by answering: what’s an alternative ETF? why should you care? how does it precisely fit into an asset allocation plan?

Best Blogs of the Week #260

Posted by Anu Heda on Feb 06, 2017, in Best Blogs of the Week , tagged with Franklin Templeton, MainStay, Principal

Quality posts this week, led by a captivating post comparing this administration to the start of Reagan’s.

Franklin Templeton – The Sectors Most Likely to Cheer US Tax Reform – It’s always tough to gauge the impact of policy shifts in isolation. However, we think broad tax reform combined with other fiscal stimulus measures, such as infrastructure spending and repatriation of foreign profits, could be very effective (at least in the short term) in providing a boost or acceleration in gross domestic product (GDP) growth over the next several years.

Mainstay – Reagan vs Trump: Parallels, Implications, and Results – In 1981, U.S. inflation was just starting to decline from peak levels near 15%, as the Fed lifted rates above 20% to choke off inflation. An elevated unemployment rate in 1981, at 7.8%, with baby boomers still entering the workforce, meant there was considerable scope for workers to return to or enter the job market, once inflation was arrested and broader economic conditions improved. It also meant there was pent-up demand for credit. By contrast, inflation is now inching up from below 2%

Principal – Questions around financial regulation changes – For all of the fighting around Dodd-Frank, it’s one of the primary reasons the U.S. banking sector was able to right itself so quickly after the 2008 financial crisis.

via Mainstay