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  • Why I Am Becoming A Passive Investor [View article]
    Dear Therman,

    if this is the feeling you come away with after reading my post, then im sorry and have failed to carve out my message clear enough.

    I dont have any active investment product to sell but analyse both active and passive products all day all week, and think the best approach is an active approach using low cost passive and sometimes active products.

    In my opinion the reason Active Management is failing compared to a passive index based approach is that the cost associated with active management is high, and managers tend to focus on creating Alpha, through selection or timing rather than through risk management.

    At the end of the day i believe that whats make you succeed is you ability to find and manage the best structured, best priced product for any chosen return driver exposure.

    Below an idea to a solid conventional foundation build on a mix of cheap active and index based ETPs, but it is only a start..

    Fixed Income: RIGS, BYLD

    Equity: DNL (USD Hedged), IDV
    Sep 27, 2014. 10:29 AM | Likes Like |Link to Comment
  • Why I Am Becoming A Passive Investor [View article]
    Hi Bob,

    I dont think we as private investors should be comparing or compete against hedge funds..

    Hedge funds are set to create absolute returns, whereas we have future liabilities we invest to cover. We dont have to compete against HFs or the market.

    The 10% p.a. return we create next year should “Taste” better because it is derived through the construction of a robust portfolio and solid process.

    We work with the risk denominator..

    In your portfolio above, you are essentially just exposed to two return drivers..

    The Treasuries provide exposure to a duration risk premia while all the Equity product aim to capture return from Economic growth or multiple expansion. Any marginal equity based ETF you add to your portfolio actually increase the real risk, as it cater to the same return driver.

    So we need to find more real fundamental non-correlating return drivers, and this can be hard. Hard because we are not trained to think this way. Mikes book helps..
    Sep 27, 2014. 05:07 AM | Likes Like |Link to Comment
  • Why I Am Becoming A Passive Investor [View article]
    Long Term:
    1. Each Commodity Future markets are exposed to it own supply/demand dimensions
    2. Implied Volatility tend to be priced higher than historic
    3. Dividend Futures structural imbalances
    4. Carry trades
    5. Momentum plays

    You have to be comfortable using derivatives going Short to offset and carve out drivers. ETPs also exist that provide access to some.
    Sep 26, 2014. 12:39 PM | Likes Like |Link to Comment
  • Why I Am Becoming A Passive Investor [View article]
    I will recommend everybody to read Michaels book and it will all come clear. It challenges the convention, and force you to consider what fundamentally drives the return on a given investment. Turns out most traditional and many alternative investment such as Equities, Corporate bonds, Real Estate are all driven by the same return driver. Market sentiment in the short term, and economic growth in the Long Term.

    If you want a truly diversified portfolio you need to find or isolate several such return drivers, and that is just bloody hard but its the only sustainable way.
    Sep 26, 2014. 09:19 AM | Likes Like |Link to Comment
  • Emerging Market Debt's Wild Ride [View article]
    Hi Brad, Thanks for the analysis!

    Do you know if the spread between EM Earning-yields and Rate-yields has increased?

    Why did you decide to compare this play based on Mutual Funds and not ETFs? Looking at the ETP database, I count 48 ETFs Globally on this theme.

    I suspect some of the active managed has indeed carved out RMB exposure
    Jan 7, 2014. 05:12 AM | Likes Like |Link to Comment
  • Deceived By Correlations: A Quant Conundrum [View article]
    The author has a ultra important message here, examples contrived through generating a number of GBM processes or not!

    Think of the implication on Minimum Variance investment product. Such product are constructed through the use of the co-variance matrice only, and highly sensitive to correlation estimates..

    Ps. For Minimum Variance products based on Indices from MSCI or S&P, a 6 month out-of-sample return-serie is used to calculate the co-variance matrice.
    Apr 10, 2013. 09:28 AM | Likes Like |Link to Comment
  • Deceived By Correlations: A Quant Conundrum [View article]
    Hi Francois Lhabitant also wrote a peper on this some years ago:

    Apr 9, 2013. 01:19 PM | 1 Like Like |Link to Comment
  • Bridgewater, Dalio And The Gospel Of Diversification - Post-Modern Value Investing? [View article]
    @Snoopy, as i understand it Dalio look at investing from a return driver rather than asset classes. Many of the asset you mention share the same return driver.

    I also believe that if you can then "Port" out systematic factors/beta exposures, you are essentially able to engineer a set of market-neutral, relative-value return streams, that are not only less volatile and smoother, but likely also non-correlating. (at least only the non-correlating should be combined).
    Nov 6, 2012. 03:09 AM | 1 Like Like |Link to Comment
  • Underlying Disaster In Europe Accelerating: Spain's Finances Collapsing [View article]
    James.. speaking of an eventual Armageddon! Why would you not handle this through a tail risk overlay. Have you seen basis risk between cash markets and derivatives increase during prior "Black Swans" to an extend that the derivatives has no credibility when needed?
    Sep 25, 2012. 04:00 PM | 1 Like Like |Link to Comment
  • Revamping Your Bond Portfolio With A Simple Momentum Strategy [View article]
    Im all for pairs-switching strategies, but how many times did you switch, and is the momentum return series net commissions?
    Aug 31, 2012. 03:03 PM | 1 Like Like |Link to Comment
  • My Dividend Retirement Plan [View article]
    @HackFab - Regarding the Covered Call, how do you implement it.

    Are you writing calls on stock you believe, is running out of steam in the short term. Or

    Are you writing Calls on Sector ETP's in those sectors you are overweighted?
    Jan 10, 2012. 10:51 AM | Likes Like |Link to Comment
  • How To Protect Your Portfolio Now [View article]
    I have read the book, and im all in on the concept. Im however struggling with getting my head around the thought process. I guess im damaged by the traditional way of approaching the semantic.

    A starting point could be, to split products into two starting groups.

    A. Unconditional Directional Exposure, this is for of ETPs that just take a long or short, leveraged or un-leveraged directional exposure.

    B. Conditional Dynamic Exposure, this is for product , that take a position conditional on some parameter. And hence much more dynamic.


    Trend - Single Asset - Pair Switching
    Trend - Multi Asset - (WDTI, VQT)
    Trend - Currency - Carry Trade (DBV)
    Market Neutral -
    Dec 16, 2011. 10:27 AM | Likes Like |Link to Comment
  • How To Protect Your Portfolio Now [View article]
    Hi Joseph, how do you evaluate what return driver a ETP belong to. Is there a Taxomony or framework developed yet?
    Dec 16, 2011. 08:47 AM | Likes Like |Link to Comment
  • Identifying Portfolio Risk: Characteristics Vs. Factors [View article]
    Most of us has been indoctrinated by CAPM/APT to the point where no one question the soundness of the methodology. If one look at the volatility of factor loadings, it makes me wonder if their is really any value in polishing a kalman filter.
    Perhaps the count of principal component at a given explanation point, and under a steady regime, could produce some evidence into the soundness of all this beta conversation.
    Nov 23, 2011. 06:38 PM | Likes Like |Link to Comment
  • In Search Of The Best Emerging Market Bond ETF [View article]
    Im looking at EM local curr. denominated ETP vehicles atm.
    and have not been able to get a major index provider like Barclays to forward index methodology behind their relevant EM debt indices.
    All i have is information provided by ETP providers.

    At a time where everyone is talking about transparency I dont see why anyone should put money into a ETP with opaque index methodology. Elements like weight caps or credit requirements are essential elements of a prudent due diligence, but this is not always available.
    Nov 23, 2011. 06:21 PM | Likes Like |Link to Comment