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Best Blogs of the Week #217

Posted by Anu Heda on Feb 01, 2016, in Best Blogs of the Week , tagged with ,

Equity market volatility continues increasing (in the short-term) and the industry’s blogs react precisely. No less than 7 posts this week on the subject. We captured our favorite 2 from Franklin Templeton and Vanguard.

volatility, naissance

Franklin Templeton – Will Market Volatility Put Rate Rises on Hold—for Now? – Taylor’s base-case scenario for 2016 is more optimistic than the market consensus, and he has rising hope for future rises in interest rates.

Russell – Diversification – Not feeling that great? – … the temptation for investors to abandon portfolio diversification and chase the “winning” asset class.

Vanguard – Don’t do something – just stand still. – Intellectually, we know that exiting markets during downturns is counterproductive. But action always seems better than inaction.

Best Blogs of the Week #216

Posted by Anu Heda on Jan 26, 2016, in Best Blogs of the Week , tagged with ,

Many asset managers are starting to acknowledge and blog about a potential global recession. Here are two of the better posts related to a global recession.

M & G – What’s all this fuss about a recession? – If we’re sticking to the facts, this sell-off is way over-done. To make us worry that we are about to plunge into global recession we would have to hear more convincing explanations as to how the factors impacting asset prices are going to become net negatives for global growth.

Wells Fargo – Worried about the market? These charts can help – So far in 2016, the daily return on the S&P 500 Index has been -2% or worse three times in the span of 12 days. For perspective, the stock market dropped that many times plus one for all of 2012. The average number of days the market drops 2% or more is five times per year.

How Good is T. Rowe Price’s Forecast?

Posted by Mike McLaughlin on Jan 15, 2016, in Thoughts , tagged with ,

T. Rowe Price recently announced a significant expansion of its advisor-focused Sales efforts. Per Ignites (subscription), the firm plans to:

  • Double the size of the 32-person broker-dealer Sales force
  • Add 4 internals to the RIA team in order to create a 1:1 external-to-internal ratio

These announcements always make a splash in the industry. People are interested in questions about the potential success of the effort – does a firm like T. Rowe Price have enough brand equity with advisors to warrant such an investment? does a 1:1 ratio make sense for RIA teams?

But the part that interests me most is the proposed timeframe of the build-out, which T. Rowe Price pegs as 2-3 years. Why? Because the time horizon:

  • is not so short as to make the plan a sure thing, as firms can generally accomplish short-term initiatives with relatively high probability
  • is not so long as to make the projection somewhat meaningless, as the specifics of a 10-year plan within a given firm tend to boil down to pure speculation

Three years is short enough for a firm to make a reasonable projection, and long enough where many things can change and impact the outcome. This makes the significant and public nature of T. Rowe Price’s plan interesting. Consider some of the things that could materially impact the expansion plan over 3 years:

  • a bull or bear market
  • strong or weak relative product performance
  • shifts in advisors’ and investors’ product preferences toward or away from T. Rowe Price’s offerings
  • management team stability or turnover
  • operationalizing and managing a much bigger Sales team

I’d imagine T. Rowe Price has modeled the various scenarios and is committed to the plan. But I also think that the non-controllable (and even some of the controllable) variables are potentially-impactful. So, over the course of the proposed timeframe there is at least a decent chance that the firm will markedly deviate from the plan as it is defined today.

It will be interesting to see, 2-3 years down the road, just how good T. Rowe Price’s forecasting proves to be.

Best Blogs of the Week #214

Posted by Anu Heda on Jan 11, 2016, in Best Blogs of the Week , tagged with , , ,

Welcome to 2016. We saw decent activity over the holidays with some very well-written year in review and 2016 forecasts throughout the asset management industry.

BlackRock – What I Got Right (and Wrong) in 2015 – I didn’t consider that investors would have to pay Germany for the privilege of loaning it money for five years.

JPMorgan – 5 Realistic Surprise Predictions for 2016 – Brazilian local debt returns 40+%

WisdomTree – Major Central Banks Policy Implications for 2016 – … in assessing China’s growth potential, many focus on old economy indicators and miss out on newer economy signals.

Two other posts were excellent in supporting intermediary and institutional investors.

BlackRock – A Strategy for Managing Volatile Markets –  … we like it or not, emotions tend to drive many investment decisions and this often causes investors to buy high and sell low, which is the very opposite that we need to be doing.

Russell – Exploring the risks and challenges of generating yield – When evaluating strategies, it’s essential to consider where yield is coming from and ensure that potential risks are managed appropriately.