Capital committed to private equity (PE) funds worldwide has risen substantially in the last two decades, thanks largely to U.S. pension funds searching for alternatives to public equity markets that might help them meet their return objectives. Endowments seeking to replicate the successes of the Yale Endowment have also contributed to the growth of PE…
Most investors believe all passively managed funds within the same asset class should have the same, or at least very similar, returns. However, while all index funds and passive structured asset class funds are similar in the way that rectangles and squares are similar, they are also very different. All squares are rectangles, but not…
Earlier in my career, I switched firms. The change meant I left a position where I couldn’t legally call myself a fiduciary. But at the new firm, I was required to be one. I was super excited. Finally, I could tell my clients just how great it would be for me to act as a…
“Carl,” my friend told me, in a heated moment of financial debate, “You need a new truck like you need a bullet in the head.” I fired something back about how off base she was, how it would be a sound purchase, and who was she to say anyway? We went back and forth. It…
There’s a lot of talk in the media about “low-information” voters. Ted Cruz may be responsible for coining the term. He referred to supporters of Donald Trump as those “who have relatively low information, who are not that engaged and who are angry.” He observed that other candidates are beating Trump “when voters get more engaged and…
“A lot of career advice begins right back at age six,” writes author Chris Guillebeau in his newest book, Born for This: How to Find the Work You Were Meant to Do. But in case you’re expecting some fluffy self-help propaganda that over-inflates your ego in an attempt to win your purchase of the book,…
It’s a mystery to me why so many investors pay brokers to pick “winning” mutual funds. But they do, and it turns out that they aren’t alone in this often fruitless quest. Pension funds pay obscene fees to “consultants” who claim the ability to select outperforming mutual funds or other types of investments. A flawed…
I was driving with a friend recently and telling him about some projects that really excited me. I mentioned a new book I’m working on, an article I’m writing and this new hobby of adventure motorcycling in the desert. He interrupted me and said, “How do you stay so motivated and so excited about things?”…
Earlier this week, we examined a recent study contributing to the literature that supports a behavioral-based argument for the value premium, in particular that investors persistently overvalue the earnings prospects of growth (“glamour”) stocks. The study—“Glamour, Value and Anchoring on the Changing P/E”—posits that the differing experiences of glamour and value investors could be explained…
As the annual S&P Active Versus Passive (SPIVA) scorecard demonstrated, 2015 was another painful year for U.S. actively managed funds. It found that 66.1% of large-cap managers, 56.8% of midcap managers, 72.2% of small-cap managers and 61.9% of real estate investment trust managers underperformed the S&P 500, the S&P MidCap 400, the S&P SmallCap 600…
Hedge funds entered 2016 coming off their seventh-straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. And for the 10-year period ending 2015—one that included the worst bear market in the post-Depression era—the HFRX Global Hedge Fund Index managed to return just 0.7% per year, underperforming every single…
Don’t get me wrong. I believe the new fiduciary rule recently announced by the Department of Labor (DOL) will be a net plus for retirement plan participants. The rule expands the definition of “fiduciary investment advice” and requires all financial professionals (a ubiquitous term that encompasses registered investment advisors, brokers and insurance company representatives) to…
At the start of each year, I put together a list of predictions made by gurus (and often repeated by investors, who hear about these forecasts through the financial media). It’s sort of a consensus of things “sure” to happen in the upcoming year. We keep track of these “sure things” with a review at…
As the director of research for The BAM Alliance, I frequently receive questions related to the advisability of purchasing payout annuities (as opposed to variable annuities, which I generally categorize as products meant to be sold, not bought). Combine the relatively poor performance of equities since 2000 (the S&P 500 returned just a little more…
There’s very strong historical evidence to support the existence of a value premium in equity markets. While there’s no dispute over the existence of the value premium (value stocks have provided an annual average return 5% higher than growth stocks over the long term), there is much debate over the cause of the difference in…