“Why Fallen Angels Fall: An Examination of Nonfinancial Corporate Fallen Angels 1999-2013 and 2014 Outlook” Kenneth Emery and Daniel Gates, Moody’s, February 3, 2014 Limits on junk bond holdings in investment-grade portfolios can lead to indiscriminate selling when debt gets downgraded from investment grade to speculative grade. Moody’s examines the long-run characteristics of such “fallen…
VantagePoint is a new quarterly publication from our Chief Investment Strategist summarizing C|A’s total portfolio advice. Advice in Brief Review portfolios to prepare for the prospect of continued tapering and ultimate tightening of monetary policy. Income-oriented assets that benefited the most from quantitative easing are likely to be hurt the worst as monetary policy normalizes,…
Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?” Holmes: “To the curious incident of the dog in the night-time.” Gregory: “The dog did nothing in the night-time.” Holmes: “That was the curious incident.” —Sir Arthur Conan Doyle, “Silver Blaze” Since 2008, US money supply (M2)…
Recent comments by several ECB governors have fueled speculation that the bank might ease further at its upcoming meeting on April 3. While the Eurozone is slowly recovering, unemployment remains elevated and concerns are mounting over deflation. Near-zero interest rates limit the ECB’s options, leading some analysts to believe a more extreme step, such as…
“The Arithmetic of ‘All-In’ Investment Expenses” John Bogle, Financial Analysts Journal vol 70, no. 1 (January/February 2014): 13-21. Jack Bogle, the founder of Vanguard, argues that commonly cited expense ratios understate the true, “all-in” cost of investing in actively managed equity mutual funds. He estimates the magnitude of the additional costs and concludes that a…
“What Happens in EM (Mostly) Stays in EM” Goldman Sachs, January 29, 2014 Problems common to multiple emerging markets have attracted increasing attention from investors, helping cause a global sell-off in January. While the domestic challenges for EM countries are likely to persist, argues Goldman Sachs’ economics research team, the risk that they will impact…
Executive Summary Private investments often play an important role in an investor’s portfolio, yet the inconsistent methodologies typically used to evaluate private investment performance and public market performance result in a lack of understanding about true relative performance. The two most common measures of investment performance—time-weighted returns (TWRs) and money-weighted returns, typically an internal rate…
The endowment model of investing is far from broken. Early adopters of the model continue to push forward, reaping impressive gains along the way. In this paper we provide a practitioner’s perspective on the endowment model, the experience of some early adopters of the strategy, and the execution of the model in the current environment.
Impact investing, through which investors allocate capital to market-based (i.e., profit-oriented) solutions to social and environmental challenges—in contrast to philanthropic or political solutions—has garnered increasing attention over the last decade.
Executive Summary Many families have significant wealth tied up in the publicly traded shares of a single firm. Concentrated exposure to a single stock—often the family’s original source of wealth—represents a significant risk to the family’s wealth and its future spending and charitable-gifting power. Single stocks, on average, are about 68% more volatile than a…