Is It Now Growth at Any Price?
In private investing, it appears that way, but a deeper look suggests there could be a method to the valuation madness.
Research Publications Archive
US Mid- to Large-Cap Equity Manager Performance: 2020
For the seventh straight year, the majority of active mid- to large-cap managers underperformed in 2020, with 63.9% lagging the benchmark (gross of fees). This chart book is our annual summary of the absolute and relative performance of managers that report to our database.
Decades of Data: United States 1900–2020
The 2020 US edition of our annual report on the history of financial markets provides context for the range of returns investors can expect from equities, bonds, and cash; reveals the importance of various components of equity returns; examines the evidence for equity mean reversion; and reviews the relationship between initial valuations and subsequent returns for equities and bonds. It also analyzes the historic economic declines and sharp asset price movements that resulted from the COVID-19 pandemic in 2020.
Annual Review of Endowments: Fiscal Year 2020
This report summarizes returns, investment policy, asset allocation, and related trends for 312 endowed institutions. Included are exhibits on asset class returns, performance attribution, risk analytics, policy portfolio benchmarking, and uncalled capital commitments. The analysis is broken down by size of assets under management and by institution type. The report also contains sections on investment manager structures, payout from the long-term investment portfolio, and investment office staffing and governance.
Are Hedge Funds at Risk from Retail-Driven Disorder in Equity Markets?
No, we do not believe that is generally the case. While the recent wild ride of a few companies’ share prices was novel in that it was coordinated by retail investors on the social media platform Reddit, the short coverings that contributed to the price spikes were all too familiar to long-time investors.
Brexit Update
The historic milestone reached when the white smoke emerged from Brussels and London on 24 December 2020 represents the end of the beginning in the establishment of the new relationship between the UK and EU, rather than an end in itself. Nonetheless, with the lingering threat of a tumultuous no-deal exit now removed, the headwind that this represented to the performance of UK assets has now subsided.
New Zealand Outlook: Complacency Is the Biggest Risk
New Zealand has arguably fared better during the global pandemic than any other developed country. While 2021 should see the New Zealand economy continue to fare well, complacency is the biggest risk, both in regards to COVID-19 and global growth, but also in relation to sky-high equity valuations, both at home and abroad.
Should Investors Be Concerned About the Degree of Concentration in US Equity Markets?
Yes, because rising concentration reflects rising valuations for the largest stocks, which are likely to serve as a headwind to index returns. Further, the growing market share of these companies increases the potential for rising regulatory oversight.
College and University Investment Pool Returns: Fiscal Year 2020
This report summarizes the results of our fiscal year college and university survey. Included are commentary and analysis of investment performance, asset allocation, and related trends for 159 colleges and universities. The report also summarizes peer data on topics such as investment policy, portfolio manager structures, spending, and investment office staffing and governance.
Playing Defense in a Low-Rate Environment
Investors have predominantly relied on developed markets sovereign bonds for defense in balanced portfolios, but low rates have diminished their diversification characteristics. We find that a diversified basket of “defensive” assets has provided comparable diversification characteristics to developed markets sovereign bonds historically. While this basket may not solve all challenges associated with today’s low-rate environment, we view it as better equipped than developed markets sovereign bonds to defend balanced portfolios during future periods of equity market stress.