Yale’s Actively Managed Fund Performance Waning

The majority of the Yale University endowment fund is invested with active managers but, if you compare its returns to low-cost active strategies rather than to passive indices, “Yale’s active managers don’t look so special,” writes Bloomberg’s Nir Kaissar. In its recently released 2016 annual report, the article says the esteemed university’s endowment rebutted “fee bashers” by arguing, “The important metric is net returns, not gross fees.” Kaissar points out, however, that Yale’s attempt to substantiate high fees in the name of net returns is no longer valid.  While low-cost “smart-beta” funds haven’t been around long enough to allow a […]

Stock-Pickers Beware: Bots Are Here

BlackRock’s March announcement that the firm had reduced its staff of stock pickers to increase its focus on quant strategies may support the consensus that “active management is dying,” but Bloomberg columnist Nir Kaissar argues that “the problem is not that active managers fail to outperform the market; it’s that they keep that outperformance for themselves through high fees.” “Smart beta” index funds, on the other hand, have been able to beat the market at very low-cost to the investor. Kaissar offers data (provided by Dartmouth professor Kenneth French) showing that a “simple quantitative strategy” could have generated the same […]

Harvard Endowment Goes Back to Basics

Last year, Harvard University allocated 14 percent of its $35.7 billion endowment fund to hedge fund strategies, but managed these internally rather than through outside managers. This according to a recent Bloomberg article by Nir Kaissar. The article explains that this departure from the traditional endowment model (used by peers such as Yale and Columbia universities) represented an effort by Harvard to retain the typical management fees (2 percent) for its own coffers. Unfortunately, however, the plan has been costly for the university (see chart below): But change is underway, writes Kaissar. Harvard has hired Nirmal Narvekar, the former chief […]

Bloomberg’s Kaissar on Dow Milestone

Before the fanfare of the Dow Jones Industrial Average hitting 20,000 (which occurred on January 25th), Bloomberg columnist Nir Kaissar asserts, “it’s not clear whether that milestone will be cause for celebration or concern.” The index stands at 20,093 today. Kaissar speculates that when the Dow first hit 100 (in 1906), “investors were drunk with profits and expecting the party to continue. What they didn’t know was that it would take the Dow 36 more years to climb above 100 for good.” He offers a chart reflecting the movement of the index since that time: Kaissar explains that between 1906 […]

The Elite Edge in Market Performance

Elite university endowments, such as those of Harvard and Yale universities, have been the envy of many for years, writes Bloomberg’s Nir Kaissar. But things have changed. Notwithstanding the “countless resources and connections and clever analysts,” he writes, those endowments have not performed much better than a traditional 60/40 portfolio of U.S. stocks and bonds. The culprit, explains Kaissar, is the heavy proportion of alternatives in those funds—”big bets on things like hedge funds and private assets”—which have suffered poor performance in recent years. According to Kaissar, while the deep pockets of these elite endowments will undoubtedly provide ample cushion, […]

Emerging Markets Are Making a Comeback

As the S&P 500 continues to hold investors’ attention with its steady climb, BloombergGadfly’s Nir Kaissar shares his perspective on how and why emerging markets might deserve some attention. Kaissar points out that emerging market stocks have recently outperformed the S&P 500, a sharp reversal from recent years. The MSCI Emerging Markets Index is up 14.8% this year (through August) compared to 7.8% for the S&P. There are signs, he says, that U.S. investors are concerned about stretched valuations, as shares in what have traditionally been considered defensive sectors (consumer staples and utilities) are currently more expensive than those in […]

Bloomberg Gadfly Kaissar Refutes Conventional Wisdom on Value Investing

We’ve seen growth stocks outperform value for a decade, says Bloomberg Gadfly Nir Kaissar, so some investors are thinking it’s time for the tide to turn. He cites evidence in the form of Bloomberg data showing that investors put $5.5 billion into value ETF’s and withdrew $6.2 billion from growth ETF’s so far this year. However, Kaissar points out, the adage that value stocks outperform during expansions and underperform during contractions just doesn’t hold up. He cites reports by the National Bureau of Economic Research which show that the U.S. economy has expanded since July 2009, yet growth has outperformed […]

The S&P 500: Read the Fine Print

If you’re making an argument for passive investing, you’d probably point out that it’s less expensive, it’s tax efficient, and has paid off over long periods of time. In a recent Bloomberg article, columnist Nir Kaissar describes the S&P 500 (the first index fund) as the “poster child” for passive investing, having returned 11.6% annually over the last 5 years (from June 2011 to May 2016) versus the 10.5% return of the S&P 500 Value Index fund (an actively managed fund). Through May of this year, however, the S&P 500 Value has outperformed its passively-managed cousin with returns of 5.3% […]

Follow Buffett’s Lead and Focus on Value + Quality

Investors might be surprised to know that Warren Buffett, perhaps the greatest investor of all time, is a big fan of indexing. For instance, “He has already declared that 90 percent of the money he leaves to his wife will be invested in Vanguard’s S&P 500 index fund.” But as Nir Kaissar, a Bloomberg Gadfly columnist points out, investors can glean insight into Buffett’s high quality and value portfolio at Berkshire. For example, the chart below shows that the stocks owned by Buffett trade at lower market multiple’s than the S&P and have a higher return-on-equity. Kaissar writes, “the magic […]