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Posted by on Feb 23, 2017 in ETF Strategist, Featured, Investment Perspective, Market Insight

Don’t Make The Same Mistake As Norway

Don’t Make The Same Mistake As Norway

By Roger Nusbaum, AdvisorShares ETF Strategy   The Financial Times had a lengthy writeup on the Government Pension Fund of Norway and that it is considering increasing its equity allocation from 60% to 75% as it tries to grapple with oil prices that although are well off the bottom are still low. The declines and only partial recovery has created budget deficits that need to be managed and the withdrawal rate from the sovereign wealth fund and by extension the fund’s returns are of course relevant. ZeroHedge also weighs in with its usual gloom and more gloom. I’ve written a lot of blog posts on endowments/sovereign wealth funds/pensions because I think there is a lot to learn in terms of what to do and also what not to do. Changing asset allocation after eight years of rising equity prices to own more equities is a probably shouldn’t do or at least is a risky proposition. It’s a perpetual fund (in terms of time horizon) so there was no life...

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Posted by on Feb 16, 2017 in ETF Strategist, Investment Perspective, Market Insight

The Blurry Line Between Active & Passive

The Blurry Line Between Active & Passive

By Roger Nusbaum, AdvisorShares ETF Strategist   Barron’s had an interesting ‘other voices’ column titled The End Of An Active-Investing Era by Donald Callaghan. Most of the article was about difficulty of outperforming the passive indexes. Active versus passive is not the point of this post, that’s been written about 1000 times, other than to say there are too many real world variables to active versus passive for that to even be the right question. A diversified portfolio likely includes both active and passive vehicles, owning any individual stocks is an active endeavor, certain strategies use passive vehicles in active strategies, an 80 year old client living comfortably off of Social Security and portfolio income is far more likely to care about that income while avoiding the market’s ups and downs and there are other points that make active versus passive the wrong question. What was more interesting was the conclusion with Callaghan’s ‘four key tactics’ Invest for the long term without market timing Invest globally Be Contrarian Allocate...

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Posted by on Feb 1, 2017 in ETF Strategist, Investment Perspective

Big Changes In Endowmentville

Big Changes In Endowmentville

By Roger Nusbaum, AdvisorShares ETF Strategist   Last week a lot of attention was paid to the big changes at the Harvard Management Company, the managers of the $35 billion Harvard Endowment. Half of the staff will be cut over the next couple of months and it will outsource management of more of its assets. The performance has drawn criticism in recent years as the top spot at the firm has been something of a revolving door since Jack Meyer was pushed out. This chart from the WSJ captures the point;     Obviously most of the endowments listed lost money in the year ending June 30th, 2016. To the extent these are really global macro funds (you might disagree), Barron’s coincidentally had an article about last year being a bad year for global macro relative to other hedge fund strategies. What makes them different from the typical 60/40 portfolio is that the time horizon is infinite. Barry Ritholtz pointed out that Harvard is 400 years old and that...

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Posted by on Jan 26, 2017 in ETF Strategist, Investment Perspective

The Elusive VIX Hedge

The Elusive VIX Hedge

By Roger Nusbaum AdvisorShares ETF Strategist   Last week I got an email solicitation about a mutual fund I had never heard of that seemed to have an interesting idea for a strategy. All advisors get inundated with these emails, I think what caught my eye was the word volatility in the subject. For compliance reasons, I can’t mention specific names but I think the details will be very clear. The basic idea is to manage volatility around a core equity portfolio. The fund owns one of the large S&P 500 ETFs for equity exposure, uses one of the popular VIX ETPs for volatility management and may have cash as well. Google Finance listed the holdings as 93% equity, 4% VIX ETP and although not listed the rest must have been cash. Also, where this is a traditional mutual fund I am sure the holdings info was stale but Google didn’t have a date. The fund’s literature makes it clear that the weightings change frequently. The investment objective is...

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Posted by on Jan 19, 2017 in ETF Strategist, Investment Perspective, Market Insight

Wait, How Much In Commodities?

Wait, How Much In Commodities?

By Roger Nusbaum, AdvisorShares ETF Strategist   The annual Barron’s Roundtable was posted over the weekend and had a couple of good one-liners to explore a little further. From Felix Zulauf: The U.S. stock market now is valued higher than it was 95% of the time in the past 100 years. He goes on to use the word nosebleed to describe valuations and he notes that small caps are trading at 28 times earnings and midcaps at 24 times. While I don’t know whether he is precisely correct it should be obvious that equities are not cheap. Bespoke Investment group reported (last Friday) that the trailing PE for the S&P 500 was 21.26 and the forward PE was 17.51. I agree with the idea that valuation matters but the predictive ability here is quite poor. Zulauf himself thinks the first half of the year could be pretty good for domestic equities despite the unfavorable valuation. This is a risk factor but I would not use this as a defensive...

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Posted by on Jan 5, 2017 in ETF Strategist, Investment Perspective, Market Insight

The Beginning Of The End Of Hedge Funds As We’ve Known Them?

The Beginning Of The End Of Hedge Funds As We’ve Known Them?

By Roger Nusbaum, AdvisorShares ETF Strategist   So proclaimed Bloomberg in an interesting column about investors losing interest in hedge funds due to poor performance, or perceived poor performance, and high fees. I won’t defend the fees but will point out that fewer and fewer hedge fund investors pay the full 2 and 20 (2% management fee with 20% of the gain) in the last few years. Someone expecting 50% or 100% every year from a hedge will of course be disappointed but it is worth mentioning that the first hedge fund was founded in the 1940’s by Alfred W. Jones and was designed to reduce risk. A key point from the company which is still in business; Jones referred to his fund as a “Hedged Fund” not a “Hedge Fund” because he believed that being hedged was the most important identifying characteristic. Many “hedge funds” today are unregulated investment partnerships with performance compensation structures, but some of them may not actually be hedged. Now is not the end of hedge...

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