• 5 Questions Investors Have About Managed Futures

    July 19, 2017
    Investment Planning, Managed Futures

    We were recently interviewed by a reporter for US News on the topic of Managed Futures—and why investors should consider the category. Since there’s been a lot of press about Managed Futures lately, we thought it timely to address some of the most common questions asked by investors.

  • As pointed out in a recent article by Bloomberg, trend following funds are having a rough go of it. The article states that “…by some measures, commodity trading advisers are on track to post the worst yearly return since 1987, when data were first collected on the group.” While equities have provided some trends on which to hitch their wagons, fixed income, commodities and currencies have all been more choppy, making it difficult for managers to generate gains. This is a continuation of what we witnessed in 2016.

  • Are Investors Playing Chicken?

    July 05, 2017
    Diversification, Portfolio Construction

    The first half of the year produced robust gains for the stock market, with the S&P 500 advancing by 9.3%, thanks largely to healthy corporate earnings. In fact, according to estimates from S&P, trailing 12-month GAAP earnings through June are expected to be about 21% higher than over the 12-month period ending in June of last year. However, top line growth is far less exciting – sales grew at about half the rate of earnings in Q1 – and is fighting a headwind of decelerating GDP growth, which has gone from 3.5% in 3Q16, to 2.4% in 4Q16, and to just 1.2% in 1Q17.

    Further, the New York Fed’s “Nowcast” is forecasting GDP growth of 1.9% for the second quarter and 1.6% for the third quarter. This isn’t the growth profile that many expected in the early days post-election, and with the Fed poised to begin shrinking their balance sheet in the coming months, longer term rates could move higher, which may hinder growth.

  • Most people familiar with behavioral economics will probably have heard of Daniel Kahneman and Amos Tversky. They are pillars in the field of psychology and were even the subjects of Michael Lewis’ latest best-selling book.i Somewhat lesser known, but by no means less influential, is Herbert Simon. Last week marked what would have been the late Herbert A. Simon’s 101st birthday. Simon was a pioneer in the study of decision-making among individuals and organizations, which earned him the Nobel Prize in 1978. His research is applicable to several domains including political science, psychology, and economics.

  • Caveat Emptor:
    Hedge Funds to Mutual Funds…

    June 15, 2017
    Performance Chasing, Return Expectations

    Morningstar recently publicized plans to change the way they handle the historical track records of mutual funds that have converted from a hedge fund. Currently, they display pre-mutual fund track records with two caveats: they do not include the hedge fund track record in category percentile rankings or when calculating a fund’s “star rating”. The SEC allows fund companies to market the pre-conversion history so Morningstar has included them as well. However, the research team at Morningstar recently concluded that the SEC should change its policy. Leading the way, they will remove pre-conversion track records from their database in the third quarter.