• According to a recent survey conducted by Eaton Vance, and as reported by Financial Advisor IQ, advisors and clients have disparate views on volatility, specifically, why it matters.

    “The survey also found a gap between how advisors and clients approach volatility. Among advisors, 54% say they manage and harness it, 17% want to use volatility to their advantage, and 18% just want to manage it enough to avoid losses. By contrast, 48% of clients just want to avoid losses, while only 32% want to manage volatility as well as harness it and 14% see it as an opportunity.”

    While we’re not exactly certain what is meant by “harnessing” volatility, as that sounds an awful lot like one of the other potential responses – using volatility to one’s advantage – it’s clear that preventing losses is the reason that clients care about volatility, while advisors judge that to be of lesser concern.

  • February 16, 2017
    Fees, Investment Planning

    The last decade has seen extreme fee pressure on traditional hedge funds, especially as liquid alternatives have grown, providing not only more liquidity and transparency, but typically lower fees. The standard 2 & 20 (2% management fee and 20% incentive fee) has come down for many funds. However, many investors may not be aware of so called pass-through fees, recently highlighted in a Business Insider article.

  • February 08, 2017
    Active vs. Passive, Valuation

    According to Morningstar, close to half a trillion dollars flowed into passive funds and ETFs in 2016. This at a time when equities are near their all-time highs statistically speaking. The chart below shows the P/E ratio for the S&P 500 as a percentile over time. What does that mean? It means that given the valuation of the market at any point, this chart explains what percentage of observations fell below that reading over the life of this measure. Take the most current observation for example. The trailing twelve month P/E based on reported earnings as of December 31, 2016 was about 23 times earnings (and this will change, as only about 59% of S&P companies have reported earnings thus far). That observation was at the 87th percentile. Therefore, 87% of all P/E observations from 1936 through 2016 fell below the current reading.

  • Brady or Ryan? Who to wager on in the big game on Sunday? Our partners at Analytic Investors, who sub-advise the 361 Capital Long/Short Equity Strategies, have been putting their notable quantitative skills to the test of predicting the Super Bowl winner for the past 13 years, with enviable results. Coming off last year’s correct prediction that our Denver Broncos would emerge victorious, they are now 10-3 overall.

  • January 25, 2017
    Investment Planning, Volatility

    Given Matt Ryan has never lost a Super Bowl, it seems clear that he is putting together a superior career relative to Tom Brady, who has lost not one, but two Super Bowls. As a Boston College alumni, I want to enjoy the below #AlternativeFacts, though the inference is probably flawed. (But as a lifelong 49er fan, my childhood hero was a quarterback that truly won by not losing. But I digress.) While this “fact” is amusing and purposefully misleading, there is truth in the concept of “winning by not losing.”