Index Investing
38-40
Exchange-traded funds
Exchange-traded funds have
developed from their plain vanilla
roots to offering investors more
actively managed propositions. It
is possible to buy an ETF that can
deselect particular stocks or entire
sectors from an index, as well as
products that allow the more savvy
investor to short an entire index
Asset Classes
42-43
Contrarian:
Risk-based assets
This year has been a shocker for
risk-based assets and there is little
sign that the macro environment is
going to change quickly. But there
are indications that the beginning
of the end is close. Courtiers’ Gary
Reynolds argues the case for the
long-term opportunities for these
risk-based assets, favouring longonly
equities and high-yield bonds
A flicker of light
Volatility needs to fall off before the icy uncertainty
that has beset the economy can start to thaw
If, for the past two months,
you had gained access
to a comprehensive collection
of all the market
information in the world
along with innumerable
analysts to sift through it,
providing you with the
best quantitative research
possible, it would have
helped not a jot. You may
as well have switched off
the computers and told
everyone to go home.
The story being heard
all over the wealth management
industry: “I have no
idea what to do. Volatility
is insanely high and there
is no predictable pattern”.
So if you find yourself in
that position, you are in
good company.
In a recession, the
problem to be solved is
usually that of predicting
the return of economic
44-45
Fixed income:
Far East bonds
The tremendous economic growth
figures reported by emerging
markets and Far East countries have
led to a boom time for equity funds
investing in those regions. Assuming
their long-term economic story still
holds true, Neal Underwood asks
whether investors moving away
from equities will instead look
towards Far East bond funds
47-48
Alternatives:
Funds of hedge funds
UK investors who allocate part of
their portfolio to funds of hedge
funds tend to stick to what they
know and end up with exposure
to domestic or other developed
markets. Axa Investment Managers’
Chris Manser argues that, as with
the fixed income argument (see
above), the macro factors that have
driven the Asian economic growth
story would also feed into UK fund
of hedge fund design
health. The problem this
time round is that the
financial products you use
to create the portfolios are
themselves in doubt.
But there is a dim light
at the end of the tunnel.
There is some visibility in
inflation levels and interest
rates; that gives a platform
to guess the scale of the
recession, levels of unemployment
and the impact
on various asset classes.
Volatility must drop off as
market participants get to
grips with the worst news.
Calling the bottom is generally
a mug’s game, but it
is clear we are approaching
the buying opportunity
of the decade.
So, how to best get
back into the market?
Well, the theme of this
issue is Asia: what is available
outside the troubled
Statistics
49
PA Quality Funds
of Hedge Funds
This is a list of the top 30 funds
of hedge funds, split by three
different quantitative processes.
Those sorted by Sharpe and Sortino
ratios look at a combination of upside
and downside volatility. The third
table shows that, if investment was
made on the worst possible date in
the last three years, what would have
been the maximum percentage lost
FEEDBACK
We are always looking to improve the magazine so if
you have any comments on what you have read, any
suggestions for new topics to be covered, or anything
you would like our investment panel to investigate for
you, please e-mail gary.corcoran@lastwordmedia.com
Please include your name, job title and company name.
We really appreciate any feedback
DEcEmbER 2008 [www.portfolio-adviser.com] PORTFOLIO ADVISER
equity markets? Fixed
income looks interesting
(pages 44-45), as do some
Asian hedge funds (47-
48); and if you are waiting
for the bounce-back, Fund
selector looks at the best
Asia Pacific equity funds
(pages 34-36).
In terms of portfolio
strategy, drip-feeding cash
holdings back into equities
via bonds is one argument
(see Asset Allocator,
pages 32-33); another one
is looking at both longonly
equities and highyield
bonds (Contrarian,
pages 42-43).
The veil of uncertainty
will slowly be lifted in the
next 12 months – you must
ensure you are ready act
when it is finally removed.
Gary Corcoran
Editor
50-55
PA Quality 250
This is a selection of some of the
top-tier funds available to high-end
UK-based investors. It consists of
both on- and offshore funds, passed
through a qualitative filter and
a three-year performance and
volatility quantitative filter. The funds
that make it through this process,
which was designed in conjunction
with Morningstar, are put into
categories that are commonly
used by advisers to create their
fund shortlists
Portfolio Adviser
Investment Panel
FUND SELECTION
Matthew Butcher
divisional director,
Brewin Dolphin
ASSET ALLOCATION
Ian Shipway
director of
investments,
Thinc Group
PORTFOLIO
CONSTRUCTION
Nick Sketch
senior investment
director, Rensburg
Sheppards
Mark Rushton
director,
Fortis Private
Banking
Tim Cockerill
head of research,
Rowan
Rick Eling
investment solutions
manager, Buckles
Investment Services
Nigel Cuming
chief investment
officer, Collins
Stewart
ECONOMICS
Peter Bickley
director of
economics, Tilney
Asset Management
Simon Ward
chief economist,
New Star Asset
Management
HEDGE FUNDS
Brendan Campbell
fund researcher,
Altedge Capital
STRUCTURED PRODUCTS
Clive Moore
managing director,
Investment Design
and Distribution
5
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