Studies & Surveys
Studies and Surveys provide a more macro level view and direction of the investment management industry. Available free for registered members of Investment Think Tank.
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Credit Suisse Global Investment Returns Yearbook 2010
The Credit Suisse Global Investment Returns Yearbook 2010 offers more than 100 years of data on financial market returns in 19 countries, putting into long-run perspective the current outlook for asset prices at a time of global economic recovery and high levels of country indebtedness.
This year Elroy Dimson, Paul Marsh and Mike Staunton of London Business School add Finland and New Zealand to their database of long-term returns and risks, alongside the 17 markets previously covered. The scale of analysis extends far beyond what can be contained in this Yearbook, so an accompanying volume (the Global Investment Returns Sourcebook) contains detailed tables, charts, listings, background, sources and references for every country.
The Morningstar Box Score Report – 2H 2009
Key Findings
- After accounting for the sensitivity to risk, size and style as well as costs, only about a third of active funds in the study had positive alpha over the past three years
- We found evidence of the Purity Hypothesis in 2009, as active funds performed better relative to their respective Morningstar Style Index in poor areas of the market, with the opposite true in hot areas of the market based on overall performance
- While it is true that taking taxes into account makes many outperforming funds underperformers, large cap funds were hit harder than other cap sizes
MMI Industry Guide to Managed Investment Solutions
The 2009 MMI Industry Guide to Managed Investment Solutions is the result of ongoing research and analysis on the managed investment solutions (MS) industry by Dover Financial Research, LLC, commissioned on behalf of the Money Management Institute (MMI). Since 1997, MMI has been providing research on the separately managed accounts industry, and more recently on managed investment solutions, for its members. The 2009 Industry Guide represents MMI’s first comprehensive annual publication on the MS industry. This research publication clearly moves MMI beyond the SMA industry and reinforces its position as the leading source for MS analysis.
Do Past Mutual Fund Winners Repeat?
“Past performance is not an indicator of future outcomes” is a phrase found in the fine print of all mutual fund related literature. However, investors and advisors alike consider past performance and related metrics to be crucial to the fund selection process.
Does past performance really matter? To answer this question on an ongoing basis, we are reintroducing the semi-annual S&P Persistence Scorecard. The scorecard seeks to track the consistency of top performers over consecutive year periods, as well as measure performance persistence through transition matrices. As in our widely followed SPIVA reports, the University of Chicago’s CRSP Survivorship Bias Free Mutual Fund Database serves as our underlying data source.
The Aftermath: Investor Attitudes after the 2008-2009 Market Decline
The global stock market decline of 2008–2009 was one of the sharpest on record. In particular, the year-over-year decline of 2008 was on par with calendar year losses last seen in the 1930s, and the market downturn was itself engendered by a systemic financial crisis not seen in the United States since that period. The crisis came on the heels of the sharp market decline of 2000–2002 caused by the collapse of the technology bubble. Two market meltdowns in less than a decade have meant weak equity returns and a zero or negative equity risk premium over the past decade, and have raised questions about American households’ commitment to equity risk taking.
The goal of our current study is to consider American investors’ reactions and attitudes to stock market holdings in light of the events of 2008 and 2009. In prior Vanguard research, we have examined the impact of the market decline on the behavior of defined contribution (DC) plan participants or on long-term accumulation of retirement wealth. In this study we take a more comprehensive look at investors’ attitudes and reactions.
The Aftermath: Investor Attitudes in the Wake of the 2008-2009 Market Decline
Investment Horizons: Do Managers Do What They Say?
This report examines the investment horizon of active-long only managers across different geographies and styles between June 2006 and June 2009. The overall aim of the research was not to prove that long-horizon investing is good and that short-horizon investing is bad (or vice versa), as we recognize there is a valid role and function for all types of horizons and approaches to investment. Rather the aim was to examine the extent to which there is a mismatch between the time horizon over which investors think and say they invest and how they actually invest. In this process, we examine how much short termism exists and how that varies by region and style.
Alternative Investments: What’s Your Next Move?
As investors review the asset allocation structure of their funds, there is no doubt that alternative investments will play a role in future investment decisions. This represents both challenges and opportunities for investors. The variety of strategies within this broad “asset class” presents investors with differentiated return and risk characteristics. Many opportunities exist outside an investor’s “home country” and could potentially offer greater rewards than domestically based strategies.
However, more than ever, investors need to closely examine fund terms and conditions, liquidity constraints and a managers back office operations. The level of due diligence required has indeed risen beyond just understanding the investment process. Given the upheaval in the markets, if an investor can take a long-term investment view, from chaos will come opportunity.
Perspectives on Alternative Investments – What’s Your Next Move?
Competition and Convergence: The Evolving Landscape for Hedge Funds
Commissioned by Pershing LLC and produced by Finadium LLC, examines the new and significant trend of traditional investment managers entering the equity long/short marketplace, their convergence with hedge funds and the implications for hedge funds, investment managers and their investors. The findings of this study are based on 27 detailed interviews conducted by Finadium LLC with leading investment managers in May of 2009.
Key Findings
- While investment managers had relatively few assets in long/short portfolios in the past, this area is growing rapidly, as firms are looking to diversify their business lines and compete with hedge funds. Investment managers currently control 19% of equity long/short portfolios in hedge fund account structures; that figure is expected to rise to 28% by 2012.
- It is projected that by 2012, investment managers will be responsible for $345 billion worth of equity long/short assets, up from $204 billion today. It is also projected that independent hedge funds will manage $580 billion in equity long/short assets by 2012, an increase from $460 billion today.
- Long/short mutual funds currently have $27 billion in assets under management (AUM), and offer a substantial growth opportunity for both hedge funds and traditional asset management firms.
- The new competition for assets has pushed some hedge funds into long-only strategies and others towards retail distribution.
- Going forward, hedge funds may consider investment managers as potential partners in product offerings and for mergers and acquisitions.
Competition and Convergence: The Evolving Landscape for Hedge Funds
Morningstar / Barron’s 2009 Alternative Investment Survey
Overall Conclusions
- Institutions and advisors are viewing the alternative investment realm in remarkably similar manners
- Transition, adoption of alternatives still underway—shift, increased importance relative to traditional investments
- Recession has just increased diligence, research
- For institutions and advisors investing in alternatives, the predominant objective—more than ever—remains the “best of both worlds”— portfolio diversification and absolute returns, but with the positive traits of traditional investment vehicles—liquidity, transparency
- Alternatives becoming available in numerous investment vehicles despite strong association to hedge funds.
Future of Investment: The Next Move?
This is the name of a study just released by UK-based CREATE-Research (notice the English spelling) and sponsored by Citi and Principal Global Investors. Some of the study is directed at large global asset managers, but much of the study focuses on the behavior and expectations of the end investor going forward. The section titled Market Dynamics – How will client behaviours change post crisis? was a particularly interesting read. Parts of the Introduction and Executive Summary are excerpted below.
For a copy of the entire report
Two of the four worst bear markets of the last 100 years have occurred over a span of seven years in this decade.
Client Behaviours
- Like other crises, this one will pass. But its memory will long endure.
- Clients have a new definition of what pain feels like. Once the worst of the current turmoil is over, the old normal will not be the new normal.
- There will be a flight to quality, simplicity and safety: quality defined by consistent risk adjusted returns; simplicity by transparency and liquidity of the strategies being used; and safety by capital protection. Alongside, there will be also periodic opportunism to capitalise on the current mispricing of distressed assets.
- Clients know that safe liquid assets mean low returns. Many are unwilling to buy into the risk premium story for the foreseeable future. The scale of recent losses is the immediate cause of the loss of investor confidence. But it had been eroding long before.
- First, the buy-and-hold strategy was not working, as equities were outperformed by bonds over a long period; second, nor was the core satellite approach, as actual returns diverged markedly from expected returns for most asset classes; third, nor was diversification, as excessive leverage ramped up the correlation between historically lowly correlated/ uncorrelated asset classes.