Like many elements of our investment industry, market-cap weighted benchmarks have the beauty of being long-standing, familiar and simple. Performance history is available for analysis, we all speak the same language and the indices are self-adjusting as markets appreciate and depreciate. However there are other ways of constructing benchmarks that are elegant and attractive. More […]
Pension plan sponsors continue to debate the merits of active management versus the efficiency of passive management. The answer of which strategy to use is, of course, “it depends,” but a few observations may be of interest. Over the last 10 years, the median manager in virtually all major asset classes (Canadian equities, U.S. equities […]
Investors—pension fund investors in particular—remain skeptical of a reliance on the equity risk premium. Judging from the asset mix trends and money remaining on the sidelines, many appear to have very limited expectations for stock performance in the next few years. After the market experience of 2008, Canadian equity markets, as measured by the TSX […]
While market observers still appear to be evenly split between bulls and bears, most would agree that it is not perfectly clear as to whether to build or reduce equity exposures. Even market rallies appear to be part of a long-term secular bear market. However, it is important to remember that although economies still have […]
Although many pension funds have embraced LDI (liability-driven investing) in principle, the decision to proceed with LDI is quite problematic in terms of timing and actual portfolio structure. Funds which had an LDI focus in 2008, typically defined as having a high fixed income content, did exceptionally well, although most would admit to having spent […]
Market observers can’t agree on whether inflation or deflation is the bigger threat right now. It seems that investing pension funds has never been so challenging, with the market uncertainty exacerbated by uncertainty about how much risk to assume in advance of accounting standards driving new reporting requirements for corporate plans and fiscal challenges for […]
Now that pension plans are recovering from the market meltdown of 2008 and are reconsidering their longer term investment strategy, there are two alternative paths that they might consider—described here as the “Buffett” approach and the “Yale” approach. Despite poor results during this period (a calendar year loss of 9.6% for Berkshire Hathaway (Buffett) for […]
Even Mark Carney and Jim Flaherty have different perspectives. Is this a bear market rally or an economic turnaround? Are we headed for deflation or inflation? Is the main action going to be on Main Street or Wall Street? Will the recovery be led by large cap or small cap stocks? Which sectors will lead? […]
What are the implications of pension funds assuming third party investment management responsibilities for other funds? The current premise is that pooling of assets will allow for economies of scale, thus enabling “large” pension funds to compete more effectively on a global scale with “mega” sovereign wealth funds, particularly when it comes to alternative assets. […]
This credit cycle is much like any other—a protracted period of low credit spreads lulling investors into a false sense of security, a sharp spike in credit spreads as investors made a mad dash for the exit doors, followed with a marked increase in default rates. What is a little different this time is the […]