Is active management a ‘loser’s game’?

Written by multiforte on . Posted in News

More than 40 years ago, respected US investment consultant, Charles Ellis, wrote an influential paper arguing that active investment management is a ‘loser’s game’. That is, a game that’s possible to win, but where the odds of doing so are so poor, that the winning strategy is not to play.

And yet, many investors continue to be drawn to active investment managers – those that buy and sell shares in the hope of beating the returns of the markets in which they invest.

Now, don’t get us wrong. We have nothing against active fund managers, most of whom are super smart, talented, good people. Our concern is that there are so many of these super smart and talented managers in the marketplace offering investment funds that it’s almost impossible – even for the brightest and best – to consistently outperform their peers.

And this, as counter-intuitive as it may seem, is exactly what the evidence shows.

In this month’s news, we share a just-published scorecard report on the performance of active fund managers compared with their market benchmarks. And we discuss why, even with their smarts and access to market information, it is virtually impossible for these active managers to consistently outperform.

Hot topics Q&A

Written by multiforte on . Posted in News

We enjoy holding regular “open mic” sessions where our clients have the chance to ask us any questions that are top of mind – whether it’s about the economy, changes in legislation or current issues – like the implications of the Royal Commission for portfolios.

Here we share the key insights from this dynamic Q&A. We hope you enjoy it!

Tariffs and trade wars

Written by multiforte on . Posted in News

Tariff announcements from the US and tit-for-tat retaliations from China have dominated the headlines for quite a few weeks.

While the evidence suggests that geopolitical events have no lasting negative impact on global financial markets, it is still worth understanding the nature of these events and keeping an eye on them.

This note takes a look at tariffs and trade wars, discusses the current state of play, and considers the views of key economists on how the recent developments could play out.

12 super strategies for financial year end

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As we approach the end of the financial year, we thought it valuable to provide a checklist of strategies to consider before 30 June.

1. Maximise your super contributions

Super remains one of the best ways to save for your retirement due to the tax concessions it offers.

The healthy brain

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Our brains are amazing, says Dr Nicola Gates. “They are responsible for everything, from co-ordinating all our movements, to controlling our heart beat, understanding the sensory world, solving problems, learning, and providing us with a sense of our selves”.

And yet, most of us take them for granted.

Dr Gates reminds us that our lifespans are extending – many of us will live well beyond age 80. But longevity is most valuable if we have a healthy body and a healthy mind.

So, how do we ensure that our brain span matches our life span?

To answer that question, in this month’s letter, we share some of the key points from Dr Gates’ recent presentation at our March Client Wellbeing event.

What we cover here only touches the surface – so if you want to learn more about the science of brain health and strategies to have a healthier brain, grab a copy of Dr Gates’ excellent book “A Brain for Life”.

The Australian Economy

Written by multiforte on . Posted in News

There is a long list of worries that you may hear about our economy:

  • The solid contribution to growth from housing construction seen over 2013-16 has faded and building approvals are off their highs.
  • Average house prices have started to edge down, with fears of a deeper crash.
  • The outlook for consumer spending is constrained and uncertain
  • Wages growth is at record lows
  • Underemployment is high.
  • Consumers have been running down their savings rate (to now just 2.7%),
  • Mining investment is still falling with investment plans pointing to roughly 15% falls this financial year and next.
  • The Australian dollar at around $US0.78 risks threatening growth in trade-exposed sectors like tourism, agriculture and manufacturing.
  • Underlying inflation is too low.

Yes, these are all a drag on the economy. But how much do they really matter? And what are the implications for your investments?

In this piece, we look at what matters most for the Australian economy and wrap up with a view on implications for investment outcomes.

Volatility is back

Written by multiforte on . Posted in News

It was a rollercoaster week. Here’s the daily gyrations of the S&P/ASX200 – just for last week:

  • Monday 5 February: -1.56%
  • Tuesday 6 February: -3.20%
  • Wednesday 7 February: +0.75%
  • Thursday 8 February: +0.24%
  • Friday 9 February: -0.89%

Down, down, up, up, down. It’s been a long time since we’ve seen any real kind of volatility.

This is the biggest dip since 30 June last year when the index 1.7%. And in fact, 2017 was a year of unusual calm in all major share and bond markets around the world.

Volatility’s return from its slumber is a salient reminder that sometimes markets are crazy – and that volatility is a normal part of investing.

You may be wondering what the future holds and if you should make changes to your portfolio. (You probably know we’re going to tell you not to react!)

The boring and honest truth is that a few (even large) down days is probably not going to change a thing for you as a long-term diversified investor.

In fact, reacting emotionally could harm your investment performance more than the market dip itself.

The gift of a 100-year life

Written by multiforte on . Posted in News

Celebrating a 100th birthday used to be a rare occurrence.

But right now, there’s about half a million centenarians worldwide. In Australia, about 4,440 individuals are in their 100s.

In just over 30 years’ time, the United Nations estimates there will around 3.7 million centenarians globally.

What does that mean for our lives, our work and how we support ourselves as we live longer?

The gift of a long life brings unexpected complications say London Business School Professors, Lynda Gratton and Andrew Scott.  In their book, The 100-year Life, they argue that we must re-think the way we work and structure our lives if we’re going to meet the challenge of longevity and enjoy it.

In this piece, we share their insights on how the patterns of our lives are likely to change, the new stages that emerge in a long life, and what we need to do ensure that our long life is a gift that we can live to the full.

Being a diversified investor is hard work

Written by multiforte on . Posted in News

If you’re like most investors, at any given time you will be looking at part of your portfolio and see that a once hot asset class has cooled. It’s no longer performing like it used to.

There is a strong desire to kick this losing asset class aside, and search out the next potential winner.

Right now, chances are, the loser in your portfolio is the bond investments.

And, you’re probably seeing headlines criticising bonds as weak performers and telling you that you would be wise to move on to other asset sectors. It’s easy to see why when you consider their recent relative performance.