Active Management

Ed Rosenburg, American Century’s head of ETFs, sees opportunity.

It’s been said before, but the truth appears to be this crisis is very different than others we’ve experienced. It's not an asset bubble tied to exuberance, greed, default, fraud or mismanagement of a country, currencies or anything else in our manmade economic system.

Even with all the benefits attributable to closed-end funds—intraday trading, low financing costs of leverage, ability to be fully invested, and consistent source of income—they have some idiosyncrasies that present challenges, especially during extreme volatility

Valid until the market close on April 30, 2020.

The S&P 500 closed March with a monthly loss of 12.51% after a loss of 8.41% in February. All three S&P 500 MAs are signaling "cash" and four of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard REIT Index ETF (VNQ), Vanguard FTSE All-World ETF (VEU), and PowerShares DB Commodity Index (DBC) — are signaling "cash".

Following these guidelines can help equity investors navigate the uncertainty created by the COVID-19 pandemic when selecting stocks and positioning portfolios.

Uncertainty continues to dominate global securities markets and heightened volatility is the result. Feifei Li, partner and head of equities, asks Rob Arnott, the founder and chairman of Research Affiliates, about the implications of increased volatility on investment strategies and where investors can find the best opportunities.

The Bloomberg Barclays U.S. Green Bond Index is down 2.5% so far this year -- far less than the 5.1% drop seen in the investment-grade, corporate debt benchmark.

Rebalancing is a case where inaction creates risk to policy in volatile times. One of the most critical rebalancing points of the past decade is ahead of us. So now what?

Today the National Association of Realtors released the February data for their Pending Home Sales Index. According to the National Association of Realtors®, "Pending home sales rose in February, climbing for the second consecutive month."

This article will tackle the big news. Saudi Arabia announced that it will increase oil production from 9.7 million barrels a day to 10 million and then to 12 million if needed. This news alone sent the oil price down 20% – and the whole stock market with it.

The US Federal Reserve recently announced a number of measures to support the economy and markets amid the coronavirus crisis. One involves the purchase of fixed income exchange-traded funds (ETFs). David Mann, Head of Capital Markets, Global ETFs, shares his thoughts on the subject, and what he thinks is the best way to support the corporate bond market through these purchases

On Friday, Congress approved and President Trump signed into law a $2.2 trillion emergency stimulus package, the largest in U.S. history. Most American adults will be receiving a one-time payment of $1,200 in cash.

Jon Roiter reflects on a wild ride in the high-yield credit market and whether now is the time to capitalize on attractive investments in the space.

Japanese growth stocks, along with global equities, experienced considerable volatility in the first quarter. Uncertainty around the coronavirus, slowdowns in global manufacturing activity and worries about dampened consumer activity related to Japan's consumption tax each impacted Japan's markets.

As both traditional and alternative asset markets descend into turmoil this month, it’s important to remember the inherent strengths of a diversified portfolio. A market rout always causes correlation to go to 1 across virtually all assets as investors flee to the perceived safety of cash.

There are three key areas where the allocation requirements of passive fixed-income vehicles have an impact on the market.

I expect that the most valuable aspect of our investment discipline over the completion of this cycle will be our ability and willingness to flexibly respond to changes in observable market conditions as they emerge.

While it is, of course, a cliché to say that markets are driven by fear and greed, like many clichés this one contains a strong element of truth. The bad news for us humans is that within our brains, emotion appears to have primacy over cognitive function. While this may well have kept us alive and allowed our species to thrive, this uncomplicated hierarchy doesn’t necessarily work in our favour when it comes to thinking about financial markets.

Financial markets, and the world, are in unprecedented times. Tony DeSpirito offers some perspective along with ideas for preparing for the eventual return to “normal".

The stock market today is trading at valuation levels last seen in 2008, before an unprecedented wealth creation bull market swept away the fear of the Great Recession. Then as now, it’s always about the expectations built into market prices.

During these turbulent times, how does one track and value the performance of an exchange-traded fund? David Mann, Head of Capital Markets, Global Exchange-Traded Funds, opines on ways to “keep score.”

I know this isolation is necessary, but the fabric of our firm is coming apart at the seams. Is it possible to collaborate effectively when everyone is remote?

What does your corona response look like? Consider some of these opportunities.

I’m providing some additional resources, where I took an even deeper dive into specific LinkedIn-related topics.

We are given the rare opportunity to prioritize what is most important to us without guilt. The material world is on pause, at least for a few weeks.

Research Affiliates assesses the potential impact of COVID-19 on economies and investments, and what it means for the All Asset strategies.

The impact of the coronavirus on the US economy still isn’t fully known yet, as the situation continues to evolve. However, Franklin Equity Group’s Grant Bowers sees at least three reasons to be optimistic about the long-term recovery.

We have spent much of the last week talking about the efforts coming out of the U.S., as the Federal Reserve and government leaders are working hard to offset the real economic damage being inflicted by the crisis.

We entered into the current crisis with a whole financial system that had been incentivized by policymakers to take on excessive levels of debt and leverage. The turmoil we are seeing right now is the result of the unwinding of this leverage.

These extreme measures appear to be having great success, particularly in Asian countries. Whereas the number of cases continues to rise in Italy, Spain, Iran and elsewhere, the number has begun to stabilize, if not plateau, in Asian countries.

Our Q&A webinar featured Julie Parsonnet, a top infectious disease specialist at Stanford University. We have posted the transcript for your reference and you can still listen to the replay.

Are municipal bond issuers vulnerable to the COVID-19 pandemic? We assess key sectors, from states to hospitals to airports.

As COVID-19 spread around the world in the early months of 2020, governments enacted quarantines, travel bans, school closings and other measures. Global supply chains were disrupted. Reduced demand is weighing on many industries, starting with travel, hospitality and leisure. Oil prices dropped after Saudi Arabia boosted production, in effect launching a price war with Russia. U.S. Treasury yields fell to record lows.

Municipal closed-end funds (“CEFs”) currently offer high levels of tax advantaged income and can often be purchased at a discount to their current net asset value.

Unfortunately, the premise underlying your advice may be flawed. You might be doing your clients (and yourself) a terrible disservice.

LinkedIn provides a wealth of opportunities to enhance your marketing efforts. Here is how to take full advantage of everything the platform has to offer.

This year feels so much like late in 1981, late in 1999 and late in 2008 to us. The first reaction by investors was to flush whatever they had left in economically sensitive stocks. Then, as if there hadn’t been enough torture for value investors today, Saudi Arabia decided to chop the knees out from under the oil industry in the U.S.

We have a full economic calendar. Only the FOMC decision will get major market attention. Initial jobless claims provide a post-virus look at the job market. Housing data remains interesting. Despite this, the media focus will remain on the coronavirus crisis.

Back in July 2008, then-Treasury Secretary Hank Paulson said he wanted a "bazooka" to deal with financial threats to Fannie Mae and Freddie Mac. Paulson wanted Congress to give him an unlimited credit line for these enterprises. This time around, it's the Federal Reserve firing a bazooka at the Coronavirus, with more possibly to come.

In this time of global crisis, thoughts of the now-canceled NCAA “March Madness” basketball tournament may be the farthest thing on our minds. But concerns for your clients’ financial futures have been heightened by the recent volatility. My article, which I wrote before the coronavirus crisis, reflects on a valuable parallel between predicting a national champion and achieving a desired investment return.

In terms of excitement, investing usually rivals watching paint dry. That has not been the case lately.

What happens to environmental, social and governance-oriented investment in a market shock? We’re about to find out.

An ETF that bets winning stocks will keep on winning has held up quite well amid the recent bout of market turbulence. One reason: it’s got many of the same traits of a popular low-volatility fund.

The market for funds that focus on environmental, social and governance investment principles has ballooned in recent years with more than 1,000 opening since 2015.

Cash prices in some of the most actively traded bond funds are now at steep discounts to the value of their underlying assets. The havoc is reigniting arguments around fixed-income ETFs, which trade much more liquidly than the assets they hold.

Coverage around the virus has been almost exclusively negative, as experts extrapolate worst case scenarios to spur action. It should come as little surprise then, that fear of a recession has moved to the forefront of many minds. At times like these, we think it's crucial to look at the data and note some positive developments that aren't getting as much media coverage.

Compared to past viral outbreaks, COVID-19 appears to be less fatal, yet it has received far more media coverage. Paradoxically, that may be part of the reason why it’s had a much bigger impact on public health and the economy relative to those other diseases.

The Loomis Sayles Alpha Strategies team shares some insights as markets grapple with three issues: the impact of COVID-19, an oil fight and a crisis of confidence in Western governments.

Our four general rules to help keep clients calm and invested when markets turn choppy.

The tax drag from fund distributions can be bigger than the alpha of a top-performing manager and considerably larger than the difference in fees between funds.

We highly suspect that we have seen the highs for the year. Most likely, we are moving into an environment where portfolio management will be more tactical in nature, versus buying and holding. In other words, it is quite probable that “passive investing” will give way to “active management.”

The VIX index has spiked. Over more than twenty years, VIX spikes have been excellent guides to when to put money to work in EM fixed income and equities. Investors have, on average, generated 262bps of excess return in EM fixed income and 234bps of excess return in EM equities by putting money to work during VIX spikes relative to a ‘timing agnostic’ investment strategy.

Equity markets have bounced around rather dramatically in recent weeks (up and down) as investors are trying to get a grasp of the impacts of Covid-19 (aka Coronavirus). While there will clearly be economic softening from Covid-19, the base case is that it will be transitory.

Small-value investors can choose between index funds and passively managed, structured products. While index funds have lower costs, they don’t offer the same degree of exposure to the small-cap and value factors. Here is how that difference has played out in three prominent funds over the last eight years.

Investors have been awoken to the carnage of the last three weeks. These circumstances, while unenjoyable, may be hiding the actual problems with today’s market. The unforeseen circumstances of today are no different than the past.

European investors were recently reminded how tricky it is to evaluate a company’s environmental, social and governance (ESG) credentials. Tesla’s plans to chop down a forest to build a manufacturing facility for electric cars in Germany reinforced the need for independent research and engagement to assess the risks and opportunities created by ESG controversies.

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Here are five steps to help guide you toward your own vision for 2030.

I am going to divide this letter into three sections: health and human impact (sometimes a tragic one), economic impact and investment strategy.

The popularity of ESG investing strategies has driven up the valuations of those stocks. New research shows that ESG investors should brace themselves for lower returns – and that underperformance may come at the worst possible time.

Monday, March 9, will be the 11th anniversary of the bull market that started back in 2009. With recent pullbacks and turbulence around the coronavirus, it is reasonable to worry that this anniversary will be the last and that a bear market will break the streak sometime in the next year. As such, now seems a good time to consider where we stand—and where the market might be headed.

There are things we can do to help. I’ll mention one big idea at the end of this letter. But first, we’ll take a closer look at what happened in China and how it affects the world economy.

The coronavirus outbreak has affected global supply chains, consumer demand and interest rates. In response, we’re downgrading Financials and upgrading Utilities.

Emerging markets give many investors cold feet. On our latest podcast, EM equity pro Gordon Fraser discusses whether now may be time to warm up to the elusive asset class.

There are predictable patterns in security returns that conflict with market efficiency. If there are behavioral explanations, these are called anomalies. A new study looks at whether “insiders” exploit those anomalies – and whether investors can benefit from observing insider trading patterns.

After recent sharp declines, US stock valuations look more attractive, especially compared with bonds. While the current volatility is unsettling, heightened uncertainty over earnings because of the coronavirus crisis could create opportunities for long-term investors who distinguish between winners and losers from the shock.

Responsible investing has gathered enough momentum in recent years to reach the mainstream. What is less clear is how far along global institutional investors are in the process of integrating environmental, social and governance (ESG) principles into their investment decisions.

Sonal Desai, PH.D., is executive vice president and chief investment officer of Franklin Templeton Fixed Income, as well a portfolio manager for a number of strategies. In this interview, she discusses the unique investment strategy she has developed, as well as the key risks – specifically the coronavirus – facing investors.

You are not getting what you think you bought. Even if you do want these leads as clients, you are starting the relationship from scratch.

If you are not using LinkedIn actively, you are missing a prime opportunity to grow your business. Although the social media platform has been around since 2002, it has gained renewed respect in recent years as more professionals are recognizing its value.

The US equity markets have fallen sharply the past week on concerns of coronavirus diseases 2019. This novel coronavirus affects the respiratory system, was first identified in Wuhan, China more than two months ago, and has now spread to all major economies globally.

Margaret Farquharson is a senior director with the Nationwide Funds Group and leads its exchange traded fund business, where she has oversight for all aspects of the business including product development, product management, marketing, distribution, and operations.

This commentary explores the ‘Ongoing Unknowns’ as it relates to COVID-19, as well as a bigger picture look at the last 2 decades and the decade ahead.

Bob Browne is the chief investment officer of Northern Trust Asset Management, which has more than $900 billion in assets. He chairs the firm's investment policy committee, which sets investment policy for all Northern Trust groups. In this interview, he discusses his views on the global economy and markets.

In this white paper, we reflect on the relative role, advantages and disadvantages of active vs. passive investing in emerging markets.