Profit margins are regarded by many as one of the most reliably mean-reverting time series in finance. In a global economy, high margin businesses should, in theory, attract competition that will gradually erode the ability of those companies to sustain significantly higher margins. Following the global financial crisis, US corporate profit margins expanded to new…
Executive Summary Managed futures refers to a subset of investment strategies that actively trade global fixed income, currency, commodity, and equity markets via futures and forward contracts. Approximately 70% of the capital deployed within managed futures programs is attributable to trend following strategies. Trend following is synonymous with momentum investing and is based on the…
Valuations are high, volatility near all-time lows, and policy rates on the rise; investors, meanwhile, are the most optimistic since 1987. On top of all that, the geopolitical picture is arguably more unsettled than at any point since the late 1970s. So who in their right mind would buy equities? With the standard caveat that…
As markets consider the consequences of the Federal Reserve ending its bond purchases and the possible beginning of quantitative easing in the Eurozone, recent news reports have focused investor attention on another dimension of central bank activity: their purchases of equities. Though opaque financial reporting makes detailed accounts of central bank equity holdings difficult to…
Executive Summary Alternative beta indexes strive to aggregate market securities based on objective criteria, weighting them in a way that is not limited to their share price or market capitalization. The weighting factors can include company fundamentals, share price volatility, earnings sustainability, or price momentum, in addition to a naïve equal-weighting approach. Alternative beta strategies,…
After a difficult 2013 that saw significant volatility in the real and Brazil identified as one of the Fragile Five, Brazilian markets have roared back in 2014, with the MSCI Brazil notching a 19% gain through August 31 (25% for unhedged, US$-based investors, as the real found its footing, rising 5% versus the dollar). Local…
As assets managed in passive vehicles hit new highs, reiterating the difficult task faced by traditional active managers as a group has once again become a popular pastime. We concur that the collective group will always be challenged but contend that a small segment of the group is worth it, as defined by historical and…
The competitive advantages and resulting return profile of sector specialists should not be ignored when constructing a long-term private equity portfolio While it seems clear that a sector specialist should outperform a generalist within their sector of focus, in this paper we introduce data to show that on average sector-focused managers do in fact outperform….
Benchmark ten-year US Treasury yields will be hard pressed to go above 3.5% to 4.0% in this cycle The interconnection of a number of variables affects how far rates can rise: growth, Treasury supply/demand, volume of debts and the costs of servicing them relative to revenues, and the distribution of assets and liabilities. Outside of…
In first quarter 2014, companies bought back the largest dollar amount of their own shares since 2007. With the S&P 500 Index reaching new highs, should investors be concerned that 2014 might set a new record level for share buybacks? Buybacks previously peaked in third quarter 2007, a famously bad time to buy US equities….