Previous Posts
 

Previous Posts​

Oct 2022 | Q3 Takeaways

Inflation is down from its peak—but remains elevated and continues to be a concern. A challenging quarter saw P/E multiples contract and interest rates rise. Stocks and bonds fell significantly, compounding year-to-date losses. The Fed Funds rate was increased 75 bps in July and September, a total of five increases so far in 2022.   

Apr 2022 | Q1 Takeaways

Both stocks and bonds fell during the quarter. The capital markets were increasingly focused on the risks of inflation and rising interest rates triggering a recession. Economic sanctions imposed after Russia’s invasion of Ukraine raised energy prices and added more uncertainty. After falling more than 13%, both US and international stock markets recovered, falling only 5% for the full quarter suggesting that investors believe that the risks will be contained.  

Apr 2022 | Viewpoint: Analyzing the Drivers of Performance

Some investors assume that recent returns will persist when forecasting capital markets. That is, they are tempted to extrapolate past performance into the future. For example, after the stock market returned more than 10% for several years in succession, some investors may be inclined to believe that stock prices will continue to rise at that rate. Or, after growth stocks persistently outperformed value stocks for several years, some investors may assume that pattern will continue. We believe that temptation should be resisted.

The analyses in this Viewpoint disaggregate returns into component drivers. Armed with this understanding of the drivers of past performance, investors will be better able to evaluate if recent performance is likely to repeat.

Jan 2022 | Q4 Takeaways

The market’s behavior suggests that the pandemic’s economic risks and high inflation will be contained. During the quarter, stocks rose and bond values changed little. Treasury interest rates and TIPS break-even inflation rates saw little change. Real interest rates remain significantly negative. While the Federal Reserve and other central banks remained accommodative; their tone is increasingly hawkish. QE is slowing and will end by the middle of 2022. Interest rates tended to rise at the end of the quarter, reflecting the Fed’s new stance. Economic growth is expected to slow but remain above its longer-term trend.

Dec 2021 | Selecting and Monitoring an OCIO

The rationale for delegating investment oversight to an outsourced chief investment officer (OCIO) can differ for each employee benefit plan. Plan sponsors have a fiduciary duty to prudently select and properly monitor OCIOs.

This article discusses the Employee Retirement Income Security Act (“ERISA”) considerations when deciding whether to hire an OCIO and outlines fiduciary duties when selecting and monitoring an outsourcing provider.

Oct 2021 | Q3 Takeaways

The pandemic-induced recession’s rebound appears to be behind us. A spike in inflation and economic worries are tempering recent quarters’ optimism. Growth is expected to slow but remain above trend. Markets appear to view that the spike in inflation will be transitory. Both interest rates on Treasuries and break-even inflation rates saw little change. Despite the spike in inflation, the Federal Reserve and other central banks remain accommodative. However, guidance around tapering the Fed’s bond-buying and for potential future rate hikes are increasingly hawkish. 

Oct 2021 | Viewpoint: Diversification vs. Overconfidence

Some famously successful investors downplay the case for diversification.

Warren Buffett, “Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.” 

Jim Rogers, “If you want to make a lot of money, resist diversification.”

While catchy, these recommendations ignore a crucial point—under-diversified portfolios concentrate risk. As a result, they are inappropriate for investors acting as fiduciaries, e.g., employee benefit plans. Such investors must be especially careful in balancing risk against return, must be particularly honest with themselves in appraising their skill, and must avoid overconfidence. In short, attempt to master what behavioral finance theory and decades of empirical research suggest are the most difficult of all investment skills.

Jul 2021 | Q2 Takeaways

Every few years, investment banks and asset managers “discover” a new way to improve clients’ investment results. Sometimes it’s a new idea, and sometimes it’s an old idea that’s been polished, repackaged, and pitched as new. While it’s impossible to predict with certainty whether these new ideas will work, historical examples demonstrate that investors need to look below the surface, and carefully examine the basis for the new idea’s promised performance. 

Jun 2021 | Viewpoint: Avoiding Investment Fads

Every few years, investment banks and asset managers “discover” a new way to improve clients’ investment results. Sometimes it’s a new idea, and sometimes it’s an old idea that’s been polished, repackaged, and pitched as new. While it’s impossible to predict with certainty whether these new ideas will work, historical examples demonstrate that investors need to look below the surface, and carefully examine the basis for the new idea’s promised performance. 

We believe investors should focus on fundamental economic relationships. Too often these new investment ideas are promoted using assumptions that are specious and unlikely to hold. This Viewpoint will review several historical investment fads and illustrate how deeper analysis could have avoided or mitigated the attendant losses.

Apr 2021 | Q1 Takeaways

By the end of 2021’s first quarter, equities and credit spreads had retraced their pandemic sell-offs. However, macro risks and related policy responses continue to dominate the news, a trend we expect to persist in the near term.

The quarter was good for equity markets while bond markets struggled. Increasing economic strength and vaccine roll-out optimism buoyed stocks, but growing unease over inflation pushed sovereign interest rates higher. The vaccination campaign is progressing better in the US than most other nations. Fiscal and monetary policy measures remain stronger here as well. Global stock markets reflected these divergences.

Jan 2021 | Q4 Takeaways

Despite the global pandemic, 2020 was a good year for investors. A sharp bear market was quickly followed by an unprecedented rebound. A K-shaped recovery emerged from last year’s pandemic-induced recession. Sectors such as travel and restaurants are still struggling. Others, as exemplified by the FAANGM stocks, prosper. Treasury bond interest rates fell sharply and corporate bond spreads widened dramatically. Today, Treasury rates remain near record lows, but credit spreads have recovered to normal levels based on an improving outlook for most companies. Structured fixed income products also sold off as COVID struck, but better liquidity and cash flow visibility have since restored investor demand in those markets too. Despite continued policy support, equity markets are likely to remain volatile until various pandemic-related uncertainties are resolved. We also expect sovereign interest rates to remain at or near current low levels.

Oct 2020 | Q3 Takeaways

Capital markets continue to be dominated by the coronavirus pandemic and the impact of related policy responses on world health and the global economy. After rebounding during the second quarter from the first quarter’s sharp selloff, global equity markets continued their climb during the third quarter. Nonetheless, equity markets remain volatile due to ongoing pandemic concerns, governmental policies and significant economic uncertainties. Sovereign bond yields and Treasury interest rates are at, or hover near, record lows, and are expected to remain there.

Sep 2020 | Chasing Performance

Investment outsourcing has been increasing rapidly over the past decade, as plan sponsors seek a solution to better manage risk and enhance their investment approach. Investment outsourcing is the method by which plan sponsors (or other large asset owners) shift portfolio management activities to a third party that assumes fiduciary responsibility and operates with either partial or full discretion.

Aug 2020 | OCIO Considerations

Investment outsourcing has been increasing rapidly over the past decade, as plan sponsors seek a solution to better manage risk and enhance their investment approach. Investment outsourcing is the method by which plan sponsors (or other large asset owners) shift portfolio management activities to a third party that assumes fiduciary responsibility and operates with either partial or full discretion.

Jul 2020 | Q2 Takeaways

The second quarter of 2020 was dominated by the COVID-19 pandemic and its impact on world health and the global economy. Supported by unprecedented monetary and fiscal policy responses, global stock markets rebounded sharply from dramatic first quarter drawdowns. Nonetheless, equity markets remain volatile due to ongoing pandemic concerns, governmental policies and still significant economic uncertainties. Sovereign yields, and Treasury interest rates in particular, are expected to remain at or near record lows.

Apr 2020 | Q1 Takeaways

The first quarter of 2020 was dominated by the COVID-19 virus and its impact on world health and the global economy. There has been extreme volatility across equity and fixed income markets. By the end of March, dramatic actions by the Fed and other central banks, combined with massive fiscal stimulus plans, resulted in some improvements in liquidity and stock prices with a corresponding tightening in credit spreads.

Mar 2020 | Three Signs of Chasing Performance

Despite the pervasiveness of the “Past performance is no guarantee of future results” disclaimer and the decades of research that support it, investors often behave as though past performance does predict the future. Here we provide three behaviors that suggest when you may be guilty of chasing past performance in making investment decisions.

Jan 2020 | Q4 Takeaways

Global stock markets hit a series of new highs, despite repeated pessimistic headlines. The markets for both investment-grade and high-yield bonds exceeded expectations. Economic and fundamental expectations improved, and were supported by monetary policy.

Oct 2019 | Q3 Takeaways

Despite bouts of volatility along the way, the broad US stock market eked out a small gain during the quarter, extending the longest bull market on record.

Jul 2019 | Q2 Takeaways

After a very strong first quarter and the Fed signaling potential rate cuts, capital markets continued to rise, albeit at a slower pace.

Apr 2019 | Q1 Takeaways

After a very rocky fourth quarter with the Fed putting future rate hikes on hold and fears of a global slowdown subsiding, capital markets recovered in the first quarter of 2019.

Mar 2019 | EAFE and Currency

Our chart of the month shows that foreign currency exposure hurt from 1994 to 2000, helped from 2001 to 2007, and has hurt since 2010.

Jan 2019 | Q4 Takeaways

Expectations of slower growth, tighter monetary policy and heightened political risks resulted in high volatility and stock market declines.

Oct 2018 | Press Release

Jennifer Newell, CFA, CAIA assumes the role of President, and Simon Lim, CFA, CAIA assumes the role of Chief Financial Officer.

Oct 2018 | Surviving the Next Market Crash Part 2

Stock market volatility returned with a vengeance in 2018. This two-part series looks at creating a long-term game plan that will help you stay disciplined during volatile periods.

Sep 2018 | Surviving the Next Market Crash Part 1

Stock market volatility returned with a vengeance in 2018. This two-part series looks at creating a long-term game plan that will help you stay disciplined during volatile periods.

Jul 2018 | 14 Things to Expect from your Investment Consultant

What should you expect from your plan’s investment consultant? Simple performance reports and perhaps the occasional search?!? Here are 14 services all plans should expect (but don’t all receive).