As financial advisors pour billions of dollars into index-based ETFs, the use of active managers in portfolio construction increasingly comes under question. Read more >
There is an adage from Wall Street’s early days: “Valuation helps define risk, but it doesn’t help with timing.” Brokers learned eons ago that simply because a stock is cheap or expensive says nothing about its short-term price direction. Read more >
Several academic studies have determined that investors’ future return expectations are heavily influenced by recent performance. With the Canadian stock market delivering an exceptional 21.2% in 2016 and the U.S. market up 17.4% annually over the past three years, many investors are likely ratcheting up their return expectations. Read more >
In the U.S., actively managed domestic equity mutual funds have suffered nine years of consecutive outflows as investors have poured money into index domestic equity mutual funds and ETFs. The contrast is glaring – from 2007-15, US$835 billion exited actively managed domestic equity mutual funds while $1.2 trillion flooded into index domestic equity mutual funds and ETFs. Read more >
Proponents of actively managed, concentrated portfolios will be heartened by the results of a study published recently in the Financial Analyst’s Journal.
The authors, Eitan Goldman, Zhenzhen Sun and Xiyu (Thomas) Zhou, analyzed the returns and portfolio concentration of 3,895 actively managed U.S. equity mutual funds from 1990-2012. They found that funds with a higher level of portfolio concentration within sectors display better performance. Read more >
Calendar anomalies have been studied by financial academics and practitioners for decades. These irregular stock return patterns include the January Effect, the Holiday Effect, the Turn of the Month Effect and the weekend Effect. Every spring, one such anomaly – Sell in May and Go Away, also known as the Halloween Effect – is a recurring topic in the financial press. Read more >
A tour of eurozone government bond exchange-traded funds (ETFs) provides a glimpse of the negative interest rate challenge that may confront Canadian investors within the next few years. As of March 9, iShares Euro Government Bond Zero- to One- Year UCITS ETF, managed by BlackRock Advisors (U.K.) Ltd., sported a negative yield to maturity (YTM) of minus 0.25%, while the one- to three-year and the three- to five-year versions had YTMs of minus 0.8% and minus 0.5%, respectively. Read more >