How can you improve your chances of success within active management? Consider categorizing
managers based on predictive versus participatory active management. We make the case that
participatory should be a larger allocation based on improved risk, return and transparency.
Read MoreThe ability for Canadian active managers to deliver alpha is limited to a degree, by the lack of market, security and structure breadth within Canadian capital markets. This is especially true in alternatives where we favour global managers that have access to greater breadth and generally more years of experience.
Read MoreWe reviewed the $13T U.S. asset backed securities (ABS) market from a yield, issuance, and risk perspective vs corporate credit in deciding why ABS is a solution to fixed income woes and should be a bigger portion of client portfolios.
Read MoreThe case for and use of alternatives is well established and allocations are rising. For those considering increasing their allocation to alternatives, several key areas should be considered, including people, strategy, track record and regulatory environment.
Read MoreMany Canadians are no stranger to debt. Canadian debt levels are among the highest in the world with household debt leading the way, notably mortgage debt. The majority of mortgage debt in Canada is held by banks on their balance sheet leaving minimal access for individual investors who want access to mortgage-backed securities (MBS). Are the banks protecting individual investors from an inherently risky asset class or do they prefer to keep it to themselves? To begin to answer this question we will look at indebtedness in Canada, why banks hold most of the mortgage debt in Canada and if the market should be more open to investors, or is it really too risky?
Read MoreIn certain parts of the credit markets, the room for specialists who deploy their experience and don’t mind the effort arbitrage is much greater than before. But similar to today’s world of COVID, the same advice should be applied; avoid hanging out in places with large crowds (especially those places where people get euphorically drunk on high asset prices) or at the very least, if you do, be risk-conscious and WEAR A MASK!
Read MoreThe decades long experiment with cheap credit has created a significant rise in zombie companies, increased capital allocation inefficiency and challenges for investors in non-active or inexperienced credit managed products.
$2T in leveraged buyout transactions have taken place in the last 4 years at average EBITDA multiples of almost two times what they were completed at 20 years ago. With ample dry powder the rise of the zombies may continue unabated.
Read MoreThe market rise has made many investors feel smart while making others wonder how they got it wrong. With success comes confidence and with failure perhaps some self doubt. Regardless of which side of the emotional scale you are on we need to realize that we operate in a world where we can’t predict the future and are forced to make decisions with incomplete information.
Despite the confidence of many forecasters the world is rarely black and white and your decisions are never 100% right or 100% wrong. If you were forced to bet against someone with an opposing view every time you made an investment decision you may just find that the chemistry of the way you make a decision and your confidence level in that decision will be different. The extra step of saying “Wanna bet” may just make you a better investor.
Read MoreThe most recent market fluctuations has returned attention to tail risk managers. Mark Spitznagel a Nassim Taleb prodigy posted a 4,144% return in March. Nassim Taleb is the famous author of several books including Black Swan, Fooled by Randomness and Skin in the Game. To put that in perspective if you would have invested $1 in the S&P500 in 1990 by the end of 2019 you would have received a total return of $1,621 or less than the 1 month return of Mr. Spitznagel.
For those who strive to be better than average but don’t appreciate rapidly falling back to earth in a crisis look for those investors that are students of positive asymmetry.
Read MoreThe debate seems to be over “for now” on the recovery in capital markets. If you voted V shaped, you are likely happy with your results.
Many securities have however lagged indices leaving opportunities for further growth. One place to look is in credit with unprecedented support and dislocations that include: (1) Government stimulus packages targeted to support credit not equity valuations (2) Inefficient auction based bond markets and (3) Individual credits with defined paths back to par.
For those that fear they already missed out on the equity rebound or are considering their next move credit may provide the solution for future growth, predictability and a risk tolerance more acceptable than equities.
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