Author: Anu Heda

Best Blogs of the Week #249

Posted by Anu Heda on Nov 07, 2016, in Best Blogs of the Week , tagged with BlackRock, Loomis Sayles, SSGA

Power. A President’s power on the global markets. As we’re one day from selecting (please let there not be a tie) the 45th POTUS, it’s a topic that is on many American minds. The Loomis Sayles post shares market impacts directly tied to Presidential power.

BlackRock – Are International Markets Back? – Very slowly, almost stealthily, international equity markets are clawing back relative to the United States. On a dollar-adjusted basis Japanese stock returns are now on par with the United States, with both the S&P 500 and the Nikkei 225 up around 4.5% year-to-date.

President and price to earnings since 1954

Loomis Sayles – Presidential Power: Are We At Risk for a Trade War? – The president has enormous powers to tear up trade agreements and, in many cases, to impose tariff penalties to advance US interests as interpreted by the president.

SSgA – It’s About Time: Using ‘Satisficing’ to Help Clients Make Better, More Efficient Decisions – For all investors, “satisficing” can be the foundation of a more structured process around investment decisions. Satisficing—which combines satisfying and sufficing, and was coined by behavioral economist Herbert Simon—is a way to manage uncertainties in the decision-making process, to stay focused on goals and to avoid being overwhelmed by unlimited information.

Best Blogs of the Week #248

Posted by Anu Heda on Oct 31, 2016, in Best Blogs of the Week , tagged with Columbia Threadneedle, JPMorgan, Loomis Sayles, Vanguard

1 election post. That is all I will bring you. Promise. Overall here are the four most engaging posts from the last three weeks.

Columbia Threedneedle – Election 2016: Lifting the cloud of uncertainty – Changes to tax policies are likely regardless of who wins in November. But it’s questionable how much change can actually be effected considering an expected divided government even if Trump wins.

JPMorgan – Fatter tails and endogenous risk – Although endogenous risks are difficult to quantify, there are ways to recognize and mitigate them. Analysis of flow data and correlation can provide insight into crowding and cross asset dynamics. Stress testing can help quantify potential tail losses, and hedging via non-linear products such as options can help protect against the risks.

Loomis Sayles – Global Growth Themes and Forecast (Infographic) – We’re in a “lower for longer” bond yield environment as inflation in advanced economies decelerates and major central banks—the Bank of England, European Central Bank and Bank of Japan—pursue quantitative easing (QE).

Vanguard – Good grief! They’re commoditizing index investing again – While it may be tempting to think that the same application of technology can displace the human element of running an index fund, we have not seen that disruption and probably never will. Indeed, people remain one of the most critical differences across providers.

Two Current Marketing Gaps for ESG

Posted by Anu Heda on Oct 18, 2016, in Thoughts , tagged with Legg Mason, TIAA

The ESG market is purportedly massive ($59 trillion globally with $6.5B in the US alone). Primarily these assets are held by institutional investors and predominantly in Europe. A conventional theory about why ESG hasn’t broken through in the US retail channel states FAs and HNW investors perceive a performance gap versus traditional products. For instance, a 2016 TIAA survey notes over 50% of FAs and investors expect a lower rate of return. However, significant academic research exists dispelling the notion that ESG products have lower rates of return. In a Deutsche Bank examination of academic studies, 89% show highly-rated ESG companies outperform the market. And more recent studies show the performance perception may be changing.

So what’s an asset management marketer looking to communicate its product lineup to do? For firms that have viable products and a desire to promote them, I see two approaches to begin materially-influencing US retail buying behavior.

Address Implementation

The “how” in terms of integrating ESG is often missing in firms’ messaging. There is an opportunity to answer straightforward questions like is ESG a full replacement of all my non-ESG strategies? Is it better to start in one asset class? If so, which one and why?

BlackRock provides a “Practioner’s Perspective (PDF)” that I’d consider only suitable for certain institutional investors and then a glossary of basic terms on their blog. Natixis provides a trio of views on ESG but doesn’t answer these or similar questions. Deutsche Bank shares highly technical implementation via smart beta in their 2013 paper, “SRI Integration via Smart Beta.” These examples don’t really support FAs that may consider integrating ESG into client portfolios.

Provide Examples

Showcasing practical hypothetical examples of how ESG can benefit a portfolio by improving returns and/or reducing risk while positively impacting the broader world enhances clients’ understanding. In essence, consider case studies. A case study can address performance bias or risk considerations or issues such as reducing firearms’ access (USSIF data shows over $350B in policies restricting investments in weapons manufacturing).

These approaches provide showcase whitespace in ESG marketing that may support FAs integrating ESG strategies.

[1] – Top two charts via GSIA (PDF)

3 Practices to Improve Your Firm’s Blog Posts

Posted by Anu Heda on Oct 18, 2016, in Thoughts , tagged with BlackRock, MandG, Russell

For the last five years, I’ve tracked the industry’s blog posts and seen tremendous growth. Growth in number of firms, frequency of posts, and quality per post. In the quality dimension, many aspects of individual posts taken for granted now were absent five years ago. For example, these four details were not commonplace:

Authors’ names (many posts were published by “admin” or “asset manager”)

Charts, graphs and data tables (many posts were 500+ words of straight text)

Links to related thought leadership

A clear conclusion

From reading hundreds of industry blog posts, I want to share three favorite practices.

Include a “Bottom line.” Too many times, authors post 500+ word entries without a highlighted point of view or logical next step. A bottom line reiterates a single idea to take away.
Add only relevant and simple charts. Many posts include unnecessarily complex charts. Each week, I come across a chart with multiple vertical axes, and data in both line and bar chart form. If the post’s point is so complex it requires such a difficult chart, perhaps a whitepaper is a better format.
Use a precise question as the title. Of the three, this practice is changing the most quickly in 2016. Still, we see posts titled “Q2 Bond Update” or “Views from Asia.” Titles like this often undersell the quality within. Title-as-question is not preferred for all posts, yet many posts could benefit from this format.

I imagine in 5 years’ time these will be commonplace across the industry.

Best Blogs of the Week #247

Posted by Anu Heda on Oct 03, 2016, in Best Blogs of the Week , tagged with BlackRock, Vanguard

Two posts this week featuring investing timeliness from industry titans.

BlackRock – Bonds that have seen the most traffic lately – The first thing that jumps out at me from this Bloomberg data is the continued search for yield.

Vanguard – When the worst of times is the best of times – To help you explain the challenges of timing the market to clients, we looked at the 20 worst and 20 best days from 1990 through 2015. What we found (see figure below) is that all but one of the worst days were within a month of at least one extreme up day.

Timeliness - Vanguard