• Top 10 Signs You Are Addicted to Chasing Returns

    December 12, 2017
    Chris McQuillian
    Performance Chasing

    1. You’ve contemplated buying Bitcoin in the last 7 days…

  • Long/Short Equity in a Raging Bull Market

    December 08, 2017
    Long/Short Equity, Portfolio Construction

    Through December 7th, the global equity markets have advanced by 20% year-to-date, as measured by the MSCI World Index, and they’ve annualized at close to 14% since the end of the Great Financial Crisis. Taking risk in all of its forms has been amply rewarded, and it’s been easy to ignore strategies that can protect on the downside, like Long/Short Equity. But looking at individual fund results for the category, we find that many long/short equity funds have performed quite well this year, with the top performers coming close to, and in some cases exceeding, the performance of long-only equity strategies. Of course, the opposite is true as well, with bottom performers not only failing to keep up, but actually turning in negative returns. We suspect that is a result of trying to time the market and swinging to a net short position.

  • Who Will Be the Marginal Buyer?

    November 30, 2017
    Correlation, Long/Short Equity

    The table below reflects an interesting analysis from JPMorgan’s head quant Marko Kolanovic. It shows how exposed different investor groups are to equities, relative to their own histories. Unfortunately, it’s not clear how far back this data goes, but there were a few comments that helped to define the time frame. For example, looking at U.S. Households, Mr. Kolanovic says that they are now in the 94th percentile in terms of total equity exposure (meaning that equity exposure has been lower 94% of the time), and that this is above the levels seen in 2007, and only slightly below those of 2000, so we know the data goes back at least to the tech bubble. In any event, the question this raises, is if all types of investors are near their maximum equity allocations, what does that mean for future demand for equities?

  • Italy Finished (“Azzurri Finito”)

    November 22, 2017
    Diversification, Global

    The world’s most widely viewed sporting event, the FIFA World Cup, reached 3.2 billion views, with one billion on the final game alone, in 2014. Dating back to 1930, it’s a time when players all over the world sport their home-country colors and multimillion-dollar TV contracts are inked (Fox acquired the $425M rights to the 350-hour programming in the U.S. for the 2018 World Cup).

  • How to Evaluate Managed Futures Funds

    November 16, 2017
    Managed Futures, Portfolio Construction

    We are frequently asked how investors should analyze the performance of managed futures strategies. This is quite challenging due to the diversity of the strategies employed, and the non-constant exposure, both long and short, across one or more asset classes (i.e., stocks, bonds, commodities and currencies). Because of the lack of consistent exposure, a standard benchmark like the S&P 500 Index is sub-optimal, to say the least, but there are ways to suss out a manager’s value add.