Macquarie's Dangerous Spin + Fixed-Income Fund Puzzle

Christopher Joye

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)


Please sign in to comment on this wire.