Almost universally weak performance of fund managers over the last two months has left many advisers and their investors in shocked disbelief, or hiding under their sheets unwisely hoping for a change in market conditions. It has been almost impossible for those with active manager portfolios to avoid at least... Show More

Patrick Poke

Following the falls in equity markets globally across October and November, there’s been a marked increase in bearish commentary from fund manager, analysts, and various other commentators. But as the saying goes, there’s two sides to every trade, and this is no exception. To balance out the panicked shouts, there’ve... Show More

There is (arguably of course) a bubble in nearly every mainstream asset class. A bubble in debt markets, a bubble in property, a bubble in equity, a bubble in private assets, and a bubble in the way portfolios are managed. This is an artificially created result of easy monetary and... Show More

Yes, your investment portfolio is quite realistically stuffed. At least in terms of being best aligned with what you need or want. At the very least, the investment portfolio you’re in is almost certainly less ideal than it could be, if not imprudent for the world we live in. Show More

M&A action is happening, and is one great way to diversify portfolios that is actually working if conducted by an experienced team. In contrast, many overly popular active management and alternative strategies are struggling to deliver meaningful results. Good on you Luke for continuing to deliver great results for Harvest Lane's investors.

On Ready. Set. Go. -

Great summary Jonathan. Telling the truth might get one locked up these days, albeit I hope that doesn't happen to you given your fantastic eclectic news summaries!

On Media Worth Consuming – April 2019 -

Hi Nicholas . When this (long overdue) market cycle ends, I expect we'll find nearly everyone has been swimming naked - from your large institutional investors to most retail investors! After all, isn't it normal to have 70% in equities of some sort or another, with much of it very expensive versus history. It requires several unusual qualities not to have been sucked in to buying that which always seems to go up (at least so far), but which is quite obviously overvalued, risky and dependent purely on a (most probably grossly overestimated) belief in policy makers ability to prevent this cycle from ending...

On Are you swimming naked? -

How can one decide which of the loss making companies is better (relative) value! I'm not sure value is a primary focus of many of the "revenue growth" focussed punters buying the stock. If you want value, perhaps looks elsewhere.

On Afterpay Touch Vs Zip Co -

Wouldn't it be nice if our central bank let the housing market continue its steady correction back towards a more reasonable valuation level, and stopped encouraging misallocation of capital, further speculation in property and housing bubbles. I wonder how much richer Australia could have been if government policy had have encouraged our capital into more productive purposes instead of property speculation. For starts, intergenerational inequity and populist movements might not be so prevalent. There is a general fallacy that central banks are omnipotent and drive the economy, but real economic growth is determined by so many other more important long term issues. And let's face it - if a mere 1.5% cash rate isn't low enough for you, what is!

On Underdog ScoMo has a shot... -

Good article Tracey, although I'm not sure that - having seen some very serious problems created or greatly exacerbated by (abnormal and easy monetary) policy being extended so long - we can count on future policy responses being effective at addressing the underlying issues! I wonder how long it will be until investors realise that policy is detrimentally affecting productive growth, is unsustainable, and that market returns have been pulled forward. The market appears to want to party while the path is superficially clear, with little regard to what the hangover will look like, what the dangers on the path are and what happens when the end of the path arrives. After all, good risk management hasn't matter much in the last few years and if anything has substantially detracted, so why should risk ever matter! (extrapolation is the current name of the game). More prudent investors might want to think about how diversified they really are e..g if - goodness gracious no - interest rates were to (unexpectedly) rise again for any reason...

On What if monetary policy fails? -

Fantastic article. I wonder how much how this corporate banking executive - and others like him - have got paid over the years to destroy so many billions for others? And presumably contribute to poor corporate culture as well...

On How to destroy $53 billion in two easy steps -

One has to wonder whether the huge premium of Sydney over Melbourne is justified, or whether it will continue to reduce as the multiple in Sydney comes off being stretched to the limit and as Melbourne benefits from greater population growth.

On In which capital city is housing most overvalued? -

Let us hope the RBA don't try and create further distortions by 'rescuing' the current orderly correction of the massive Australian housing market bubble with further rate cuts. An official cash rate of just 1.5% is low enough! Australia needs to find more productive things to do than misallocating excessive capital to housing and creating great generational division by creating housing market bubbles and making housing unnecessarily expensive for the working generation.

On The RBA Quietly Admits Responsibility for Bubbly House Prices -

Some Australian managers are finding the conditions highly prospective, unlike what you mention for the average Australian equity manager. For example, event driven market neutral manager Harvest Lane does not depend on the vagaries of central bankers 180 degree policy turns. They had a fantastic year in 2018 when all others wilted (they made double digit returns - including making money through the devastating October to December quarter) and are highly enthused by their future prospects. Furthermore, Harvest Lane don't earn any fees for themselves unless they make clients absolute returns > cash. Given the environment, having a genuinely aligned manager makes a lot of sense and I for one believe is worth supporting.

On Dominant themes in 5 key asset classes -

Outside a few large vehicles, the LIC space in Australia is very illiquid and hence can largely only be considered seriously by investors with very small funds under management. And as you highlight Dominic, the risks are generally under-appreciated currently by a market unwilling to spend sufficient money on due diligence and research (and which may not be justified in many cases given the illiquidity), and where manager and broker interests have too often been put first. Of course, the ease and accessibility is what makes this market attractive to investors, and made it so easy to forget about the potential hidden costs of investing this way.

On Looking out for pirates in LIC land -

Having predicted the market falls this year also, I can't wait to see the next article and how far Sydney needs to fall before it becomes fair value! The falls to fair value (or below) might be a lot bigger than most readers realise. There is good news in this though - hopefully Sydney will eventually become affordable to 'normal' hard-working productive people and their families so that they can live here 'adequately well' (poor building quality aside). Although the transition may be painful, these falls may finally kill the illogical love affair with Australian property and stop it being a huge source of wasted savings and capital - with the latter better directed elsewhere to support Australian productivity, innovation, investment, competitiveness and industry.

On How far is housing from fair value? -

Hi John and Mark Thank you for your comments. Performance needs to consider the risks taken to get that performance and whether it is sustainable. PoorIy performing managers frequently don't improve unfortunately - a deep researched understanding of the individual manager is required to make this assessment. My livewire article "Making money through the cycle" provides investors (through their advisers) with some pointers and ideas to help them carefully select the better alternative managers. I am also happy to be contacted by your advisers, and may be able to help advisers improve their offering to their clients. I will also aim to write more on selecting fund managers for Livewire in due course given the strong importance and expressed interest in this area, both from yourselves and from others directly contacting me.

On The Fund Manager Performance Fiasco Explained -

Hi Carlos Indeed, but hopefully this article provides investors (through their advisers) with some pointers and ideas to help them carefully select the better alternative managers, given what a valuable part of a portfolio they can be over time!

On Making money through the cycle -

This is fantastic to see a fund manager's efforts to publicly hold both AMP and the ASX accountable, and to consider the potential broader adverse impacts. Thank you Hamish.

On How the AMP board failed investors (again) -

Spot on Jon. There is no point betting very heavily on whether an expensive equity market goes up or not from here if you don't have to....There are other ways to make more resilient consistent returns with less downside risk which are much better aligned with most people's preferences (less likely to lose large amounts of money!)

On How to avoid Mr Market’s emotional problems -

Matthew, while you alone may have "no idea where prices will go in the short term" and "it’s impossible to forecast where things go next" it remains blatantly obvious that Sydney and Melbourne property have a very high chance of falling again in the short term, just as it was in the last few months.... Sorry, but that really is (once again) a very possible forecast to make!

On 5 key charts on the housing market -

Often promulgated is the notion that one can only buy equities or bonds or cash or some mixture of these, as if there are no other choices. Good alternative managers are an underappreciated option for investors, albeit to be effective one needs aligned managers who have genuine resilience to the downside, with an ability to still actually make good returns. Indeed, alternatives are routinely being massively under-utilised - due in part to a lack of skills and expertise on the part of allocators to choose the good ones - along with an unwillingness to be different (we might define this as putting yourself on the line for the sake of your clients rather than backing mainstream dogma). Too much rearview mirror investing (e.g. confusing a bull market with a notion that equities or properties or bonds or whatever always go up) also doesn't help...

On Bonds amplify equities' losses -

Rents - already great relative value for renters - are indeed falling in many places! Whether it falls 40% or 10%, housing appears a waste of capital.. From an economic perspective, what a shame Australian house prices have become so inflated at the expense of good productive use of our capital.

On 40% housing correction highly unlikely -