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Video: ETF specialist Ed Rosenberg addresses what the ETF market needs — and doesn’t need
Asset Management
<p>This past summer the market for ETFs -- exchange traded funds -- saw astonishing volatility. Investors aren't used to this in ETFs. Is more regulation needed? Ed Rosenberg, head of ETF Capital Markets and Analytics at Northern Trust, says more regulation won't help. Instead investors need to understand how these products were designed to behave. For better or worse, ETFs did just what they were supposed to do when the markets cracked late last August.</p>
Bill Ackman calls in ex-prosecutor to explain why it doesn't matter if Valeant broke the law
Hedge Funds
Unless you are a drug dealer or a securities lawyer, the odds are quite good that you have never heard of Jenna Dabbs. Jenna Dabbs is what I would call a bit player in the second best drama unfolding in the world of business (Theranos may be even better, but for very different reasons): The unraveling of Valeant Pharmaceuticals and
Hedge funds and the active management crisis
Hedge Funds
<p>Active management and hedge funds have suffered what amounts to a mini-meltdown in recent years as ambitious client expectations have collided with complex market conditions and slow, tectonic shifts in the finance landscape. James Bianco, CFA, president of Bianco Research, recently argued at this year’s 60th CFA Institute Financial Analysts Seminar in Chicago that a changing interrelationship between the stock and bond market alongside a plague of high correlations was responsible for recent weak performance of hedge funds and active managers.</p> <p>“In short, hedge fund performance as a group has been a complete disaster over the past five years,” Bianco said. “So, to earn the standard 2% and 20%, and outperform the index, managers have to be extraordinary. The problem is that there are probably only about 500 extraordinary managers in the world, but there are 11,000 hedge funds.” Active managers have also fared badly. “Over the past 10 years, 76% of active managers underperformed,” said Bianco, “It has been a struggle for most investors to understand how these relationships have changed.” Passive investment is increasingly the default response to such investor confusion.<br /> Performance – No Excuses<br /> While this year has been an embarrassing one for many hedge funds, longer term data suggests most hedge fund indexes perform better than stock and bond indexes and have lower volatility, according to one paper, “European Hedge Funds Industry: An Overview,” summarized in CFA Digest. The European hedge fund industry often outperforms in various strategies and rivals that in the United States, thereby giving investors access to global talents and strategic locations.</p> <p>Writing in the Journal of Index Investing, Benjamin McMillan of Van Eck Global, in another paper summarized in the latest CFA Digest, asks the question: When does active management add value? McMillan says that, contrary to what other authors claim, actively managed long-short equity hedge funds (currently the largest industry strategy) actually tend to earn negative alpha during periods of market instability. Furthermore, much of the outperformance many equity managers often claim is alpha can be explained as factors, according to Eugene Fama, Kenneth French, and fellow researchers. This seems to leave any remaining alpha attributable to some combination of momentum, fund cash management, and luck rather than any easily attributable skill. Tough times indeed for active managers and their marketers.</p> <p>More and more absolute return funds are seeing their exposures cloned when drivers of performance can be isolated and replicated. A Comprehensive Guide to Exchange-Traded Funds (ETFs) by Joanne M. Hill, Dave Nadig, and Matt Hougan identified 29 ETF-based absolute return clones and suggested that many hedge funds “lend themselves to factor-based approaches that can be offered within the ETF structure for competitive fees.” That said, the guide also points out that strateg</p>
Infographic: The Narwhal Club is home to Canada’s $1 Billion tech startups
Venture Capital
<p>The Narwhal Club is going strong with plenty of recent news concerning prominent Canadian startups. Working with Brent Holliday from Garibaldi Capital Advisors, we got the latest scoop on the sector and have updated the narwhal list accordingly.</p> <p>The most recent notable event occurred in the summer of 2015, when Markus Frind sold his 100% owned to Match Group for US$575 million. As a result, we have removed POF from the Narwhal list, and instead have inducted Markus to a new category called the Nar-Wall of Fame. allowed Markus to amass a personal fortune from profits and sale of his business that makes his personal valuation Narwhal-esque.</p> <p>&nbsp;</p> <p>Courtesy of: Visual Capitalist<br /> This was originally published by ValueWalk.<br /> Photo: Matt Biddulph</p>
Video: Northern Trust- Why we’re launching a long bond ETF when rates seem likely to rise
Asset Management
<p>Northern Trust recently launched a new long duration bond ETF, right as it seems interest rates will rise. Counter intuitive? Ed Rosenberg, head of ETF Capital Markets and Analytics, says you'd be surprised at what really happens to some bonds when the Federal Reserve raises rates. Plus: Whether or not rates or high or low, investors need to match their long-term liabilities with their investments.</p>
Where to look for outperforming active managers
Asset Management
<p>&nbsp;</p> <p>So far in my series on selecting superior active fund managers, I’ve broken the most promising research into two very different areas of focus: 1) identifying which segments of the market, or which types of funds, are most promising; and 2) what characteristics to look at in the funds themselves. The most interesting research in category 1 was the “active share” analyses by Antti Petajisto, which concluded that closet index funds (which happen to hold a near-majority of assets in the fund industry) tend to be consistent losers on an after-fee basis, while high-active-share funds with a stock-picking mentality tended to beat their benchmarks by 126 basis points a year.</p> <p>But of course not all the stock-pickers were winners, and the winning funds tended to be scattered all over the various sectors of the market. Is there a way to analyze the different segments of the global opportunity set, and determine the best places to look for those outperforming managers?</p> <p>As it happens, this is exactly the research that is being conducted by Dan Kern, president of Advisor Partners in Walnut Creek, CA. Kern has an unusual background; he spent eight years as a portfolio manager on the U.S. Growth Equity team at Montgomery Asset Management in San Francisco, and then moved over to researching funds as the managing director of Charles Schwab Investment Management.</p> <p>“Having worn both hats,” he says, “I’ve learned that investment success is frequently a temporary state of affairs. Today’s high flier is tomorrow’s loser.”</p> <p>Today, before he looks for potential outperforming funds, Kern subjects different sectors of the market to three basic tests, which tell him whether he’ll even bother to look at the funds that operate in that space.</p> <p>Payoff: the performance spread</p> <p>Test one is something he calls “payoff.” Is the potential excess return (payoff) worth the risk you would be taking if you decided to invest with an active manager in that sector? Another way to describe this factor is the “performance spread”: Where is it tightest, and least tight?</p> <p>To answer that question, Kern identified the percentage return that would qualify a fund for the upper quadrant (25th percentile) in different asset sectors, and compared it to the return that a fund would have to achieve to fall into the upper 75th percentile. He also looked at the index return. This allowed him to calculate three derivative figures: the 25th percentile return minus the 75th percentile return, the 25th percentile return minus the index return, and the percentage difference between the 25th quartile fund return and the index.</p> <p>Figure 1 shows the results for certain foreign stock and bond sectors, plus one U.S. bond sector, for the five years ending December 31, 2014. As you can see, the highest 25th-minus-75th spreads can be found in the emerging markets equity funds sector (3.02% a year), followed by foreign small/midcap equity funds (2.81%). The spread is tightest in the intermediate-term bond category. In reverse order, those two asset classes also have the highest spread between the 25th percentile returns minus the index, and the emerging-markets equity funds have by far the highest percentage difference between the highest 25% of the funds and the index.</p> <p>Figure 1 – Active-Passive Payoff Analysis</p> <p>At the other end of the spectrum, the average emerging-markets bond fund loses to the index. The other lowest payoff categories</p>
People Moves: BlackRock hedge fund manager steps down; Highland Capital hires new director
Hedge Funds
<p>BlackRock hedge fund lead steps down. Tim Webb has resigned from his posts as managing director and CIO of the BlackRock model-based fixed income group, as well as the management of the Fixed Income GlobalAlpha Fund, BlackRock's biggest hedge fund. Webb will now focus on the international fixed income business with Rick Rieder and Kevin Holt. Tom Parker will act as CIO for GlobalAlpha and the model-based unit. Opalesque </p> <p>Highland Capital Management hires new managing director. Jeff Seaver has joined the firm from Loomis Sayles where he worked as co-head of the London office. At the Dallas-based Highland, Seaver will focus on institutional investor relationships, specifically with U.S. pensions and insurance companies.<br /> Photo: ©<br /> &nbsp;</p>
People Moves: Ex-Pimco equities head launches new firm; NYLife hires retail distribution lead
Asset Management
<p>Ex-Pimco equities head launches business. Virginie Maisonnueve has launched Maisonnueve Global Advisors in London to advise investment teams about global trends, business leadership, and digital innovation. Maisonneuve had a brief stint as head of Pimco's equities before leaving in June when Pimco closed its active equities funds. Maisonneuve previously worked at Schroders as head of global equities. Financial News</p> <p>New York Life hires retail distribution lead. Brian Jacobs has joined New York Life's MainStay Investments as head of U.S. retail distribution. Jacobs comes to the firm from Direxion Investments, a private ETF sponsor.</p> <p>Northern Trust names EMEA director. Northern Trust Asset Management has promoted Hazel McNeilage to managing director for Europe, Middle East, and Africa. Previous EMEA lead John Krieg returned to the U.S. in 2014 to become global head of institutional distribution. Pensions &amp; Investments </p> <p>Commonfund names ex-CalPERS exec CIO. Mark Anson has been hired as CIO for Commonfund, effective in January. Anson currently works for the Robert Bass family office. He worked at CalPERS until 2005 when he left to become CIO of Hermes Pension Management. Anson became President of Nuveen Investments in 2007, and moved to the Bass family office in 2013. FinAlternatives<br /> Photo: ©<br /> &nbsp;</p>
Biosensors receives takeover proposal from CITIC PE
Asset Management
<p>After jilting Biosensors at the takeover altar, CITIC Private Equity is back to make amends, and then some.</p> <p>In a recent filing with the Singapore Exchange, Biosensors’ board of directors said they have received a takeover offer from CITIC Private Equity for an undisclosed amount, adding that “discussions are on-going,” and that “there is no certainty or assurance that these discussions will result in any transaction.”</p> <p>You can understand why they’re a little skeptical about it. Biosensors, a Singapore-listed, China-based medical device manufacturer, was originally propositioned by CITIC PE back in 2014, but according to another filing on the SGX, the private equity firm called off its plans and just wanted to be friends instead:<br /> “[T]he Board wishes to announce that CITIC Private Equity Funds Management Co., Ltd. (“CITIC PE”) has informed the Company that it has decided not to proceed with any take-over transactions involving the shares in the Company at this point of time. CITIC PE remains committed to cooperating with the Company and its management with a view to ensuring the Company’s continued success and to enhancing the value of CITIC PE’s investment.”<br /> Biosensors has called for a trading halt on its shares. We wish them all the best.<br /> Photo: Christina Alexanderson</p>
People Moves: AXA appoints senior fund manager; HSBC Global AM names new Singapore CEO
Asset Management
<p>&nbsp;</p> <p>HSBC Global AM names new Singapore CEO. Puneet Chaddha, a 20-year HSBC veteran, has been named CEO of HSBC Global Asset Management Singapore. Pedro Bastos, Asia-Pacific CEO of HSBC Global AM, had this to say regarding Chaddha’s appointment:<br /> “Puneet has been with the HSBC Group for over two decades and has worked in several of our global businesses. He has successfully transformed the business in India in line with HSBC’s commercial and governance strategy. We are determined to expand our presence in Asia-Pacific and capitalise on our leading expertise and capabilities as a global asset manager to provide innovative products and bespoke solutions to meet our clients’ long-term investment goals.”<br /> Chaddha has held several key roles within HSBC, and prior to his current appointment, was CEO of HSBC Asset Management India. He will report to Pedro Bastos, Asia-Pacific CEO of HSBC Global AM, and to Matthew Colebrook, HSBC’s head of retail banking and wealth management in Singapore. Asia Asset Management</p> <p>AXA appoints senior equity fund manager. Simon Weston, an old hand in the Asia-Pacific investment arena, has been appointed senior equity fund manager by AXA Investment Managers. Mark Tinker, head of Framlington equities Asia, had this comment regarding Weston’s hiring:<br /> “With tremendous experience and a strong performance track record, we are excited to have Simon join us and are certain that he will bolster AXA IM’s positive momentum in the Asia Pacific.”<br /> Weston was previously with Semeru CLSA Capital Partners in Singapore, where he was managing director and portfolio manager of the firm’s Semeru Asian Equity High Yield fund. Prior to that, he worked at Old Mutual Asset Managers, Perpetual Investment Management, and Hill Samuel Asset Management. He will be based in Hong Kong and will report to Mark Tinker. Citywire Global</p> <p>M&amp;G Investments strengthens Asia team. M&amp;G Investments, in part of an initiative meant to bolster its Asia-Pacific intermediary team, has appointed Anthony Yeung as associate director and Sophia Shi as relationship manager.</p> <p>Yeung, who apparently holds more than 15 years’ experience in business development, client management and operations, will be joining the British firm from GAM, where he handled fund distribution sales as well as client management. Shi meanwhile joins M&amp;G from BNY Mellon, where she focused on private banks in Singapore and Malaysia. They will both report to Ben Cherrington, Director of Intermediary Channels, Asia Pacific. M&amp;G Investments (pdf)</p> <p>Robeco Asia CEO resigns. Tony Edwards, in a surprise move, recently resigned from his post as Asia-Pacific CEO of Robeco. He is reportedly leaving due to family reasons.</p> <p>Edwards’ was Robeco Asia’s CEO for over four years, and drove all of the Dutch firm’s businesses in the region during his tenure. Prior to that, he held several senior roles in various firms, including Head of Asia ex-Japan for Neuberger Berman. Asian Investor<br /> Photo: Luke Ma<br /> &nbsp;</p>