In The Australian Financial Review I take the sword to Macquarie Group's silly claims that it does not "speculate" in global high-yield markets after punting $33 billion on the sector and that "it has not received, and does not receive, government backing". I also uncover a fascinating investment puzzle: almost 90% of the "active" fund managers in arguably Australia's most inefficient---and thus theoretically lucrative---asset-class, domestic fixed-income, have systematically underperformed their benchmarks over the last 5 years in a manner that is far worse than mere statistical chance (see charts below). This contrasts strikingly with the superior performance of active equities managers, who have to contend with a much more transparent, efficient and heavily contested market. I propose two related explanations: (i) fixed-income managers are mostly closet index huggers and (ii) typically attract inferior human capital given their skinnier fee structures. Read free here (VIEW LINK)
Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.