It does not feel like it was so long ago when the South African asset management industry was starting to experience a substantial rise in boutique asset managers. Now in their late teens, with some going into adulthood, we – over a three-part series – look back at the journey of the pioneers who left large investment houses to manage money within a boutique setting.
When looking at a risk and return scatter graph of funds, it seems as if those funds are standalone entities, far removed from the faces of the portfolio managers behind them. In evaluating managers for more than 20 years, STANLIB Multi-Manager has found that these portfolio managers and how they are set up to make investment decisions can be a critical factor in evaluating the investment house overall. Reason being is that these managers are only human and subject to same human bias as all of us.
Performance evaluation is one of those topics that is conceptually easy to understand, but your understanding begins falling apart once you get into the detail. Fortunately, there are great frameworks for thinking about this “problem”, and great tools for helping with the exercise.
All asset management companies and portfolio managers are different and it is important to understand each of these before deciding to invest with them as they all seek and achieve alpha differently.
Performance evaluation is carried out to find the “best” manager to meet a specific portfolio need, or to check if an existing manager still meets the client’s original portfolio need.
Allocators of capital should strive to understand performance evaluation before and during their assessment of the value add from passive and active asset managers. It is not a simple task.
More has been written about diversification than any other topic in finance and investments. Diversification is the process of allocating capital in a way that reduces the exposure to any one particular asset or risk by investing in a variety of assets or across many risk factors.
For a given level of risk, a diversified portfolio should outperform an undiversified portfolio over the long-term.
When researching this topic, one cannot help but also ask related questions, such as: how much you should invest offshore, where and with whom?
The rise of populism on the back of the Global Financial Crisis (GFC) and the plight of the proletariat dealing with high unemployment and stagnant real wages (while the rich get richer), has led to some significant and surprising elections around the world.
I have always loved magic. Initially as a child because I truly believed that the magician possessed powers beyond the physical world. Then as an adult because I knew this wasn’t the case and loved the challenge of solving the problem of how “it was done. Joao Frasco
In order to understand risk management from a manager research perspective, we first need to describe what we define as risk.