Buy-side Reports

A response to request.

The following are the sources of buy-side reports that I gathered for study.  At first I aimed on all fund management firms in Japan as I am recently looking for a job here. Soon I found that the firms with qualified reports are often multinational ones and thus changed my focus.

And this is also partly the origin of this blog.

Rates are absolutely subjective.

Number with <m <y indicates the frequency of update.

And, of course, they are incomplete.

 

English part

AM G R rate status URL
Aberdeen *** Thinkaloud(20<m), insights (10<y) http://thinkingaloud.aberdeen-asset.co.uk/thinkingaloud/ http://institutional.aberdeen-asset.co.uk/en/ukinstitutional/insights/articles-and-thought-pieces
Western Asset **** White papers(4m), the economy(4m), etc http://www.westernasset.com/us/en/research/whitepapers.cfm
AB ***** Economic Commentaries (4m), Insights blog(<30m) https://www.abglobal.com/institutions/americas/home.htm#/
PICTET *** Latest news, comment and analysis(<5m) https://www.group.pictet/corporate/en/home/institutional_investors/news.p.1.html
LEGG MASON **** Market outlook + Investment insights (<10m), Chart of the week https://www.leggmason.com/en-us/insights.html
Fidelity ** Investment outlook (1q), articles https://www.fidelity.co.uk/investor/markets-insights.page
PICMO **** Insights (<30m) https://www.pimco.com/insights
AXA IM **** Research news(10<m) https://www.axa-im.com/en/research
Russell Investment *** Insights for institutional investors (<5m) http://fiduciary-matters.russell.com/
Princial Global Investors ** Insights exept rountine (<3m) https://www.principalglobal.com/knowledge/insights
BNY MELLON *** Investment Insight(<5m) https://www.bnymellon.com/us/en/our-thinking/search.jsp?type=investment-insight
PINEBRIDGE Investment ***** Commentary (10<m), Thought papers (10<y) https://www.pinebridge.com/insights/commentary/
CAPITAL GROUP **** Macro/market views (7<m) https://server.capgroup.com/capgroup/action/getContent/GIG/Europe/Intermediaries/Investment_insights/Entry_Page/II
Invesco ** Insights (2m) https://www.invesco.com/portal/site/us/investors/insights/
Amundi **** research news (<50m) http://research-center.amundi.com/recherche/All-articles
Schroders ** Insights (<5m) http://www.schroders.com/en/insights/
Barings * Investment update(<2m), Thought pieces (<5y) http://www.barings.com/us/InstitutionalAdvisers/NewsViews/InvestmentUpdates/index.htm
Henderson Global Investor * report(<10m) https://www.henderson.com/ukii/posts
State Street ** ideas(1w) http://www.statestreet.com/ideas/publications.html
PGIM *** insights(<3m) https://www.pgim.com/insights
East Spring ** market insights (<2m), macro briefing (1m) http://www.eastspring.com/our-perspectives/Insights
Franklin Templeton Investments * Investment insight (<2m) http://www.ftinstitutional.com/ftinstitutional/institutional/insights/investment-insights
W AM
Deutsche Asset Management *** CIO views (<3m) https://institutional.deutscheam.com/globalResearch/cio_office.jsp
Goldman Sachs AM *** Insights (<5m) https://www.gsam.com/content/gsam/global/en/market-insights/market-strategy/allFilterTopic.html
Blackrock **** Insights (<20m) https://www.blackrock.com/investing/insights
Barclays * Insights (<10m) http://www.investmentbank.barclays.com/our-insights.html
W HF
AQR AM *** Cliff’s Perspective(<2m), library https://www.aqr.com/library
Two sigma ** Insights(<2m) https://www.twosigma.com/insights
Winton Capital ** RESEARCH BRIEFS(<1m) https://www.wintoncapital.com/en/research-and-insights/research-papers-briefs
Man group ** Knowledge(<5y) https://www.man.com/3/thought-leadership
GAM * Insights(<10m) https://www.gam.com/en/insights/
GMO **** Recent research (<2m) https://www.gmo.com/

 

Japanese part

J fund report status address
Aberdeen ** Monthly aisan debt market report and topic report (<5y) http://www.aberdeen-asset.co.jp/aam.nsf/japanaimkk/marketreport
Western Asset ***** White papers(4m), the economy(4m), etc http://www.westernasset.co.jp/ja/research/whitepapers.cfm
GCI AM ** Product report http://www.gci.jp/jp/news/
AB Japan ***** Knowledge & market perspective (<10m), report(<5y) http://www.abglobal.co.jp/knowledge/
岡三アセマネ ** ファンドマネージャーの眼 (1m), market report(<5m) http://www.okasan-am.jp/colum/fundmanager/
Simplex AM
さわかみ投信
PICTET **** various market news (>30m), news columns (>10m) https://www.pictet.co.jp/archives/category/news/markets?num=100
LEGG MASON * US AU market news http://www.leggmason.co.jp/market_info/index.html
MU投資顧問 ** research manager report (1m), global outlook (<5m) http://www.mu-iv.co.jp/reports/index.html
TOUCHSTONE
レオス・キャピタルワークス * monthly report (1m) http://123.rheos.jp/investment/monthly_report.jsp
PORTFOLIA
Fidelity * market report (15<m) http://www.fidelity.co.jp/fij/news/index.html?check=MR
PICMO *** Insights overview(5<m) https://japan.pimco.com/JP/Insights/Pages/InsightsOverview.aspx
AXA IM *** Research news(10<m) https://www.axa-im.com/en/research
Russell Investment *** Report (1q) https://russellinvestments.com/jp/research/research-overview/research-overview/russell-communique
Princial Global Investors ** Research report (1y), market report (5<m) http://www.principalglobal.jp/news01.html#report
BNY MELLON *** Market report (5<m) http://www.bnymellonam.jp/market
SPARX ** Japanese stock report (1m), asia report (5<y) http://www.sparx.co.jp/report/
PINEBRIDGE Investment ** market memo (10<y) http://www.pinebridge.co.jp/news/market_backnumber.php
CAPITAL GROUP *** market view (5<m) http://www.capitalinternational.co.jp/insights/archive.html
Invesco
Amundi * market report (<30m) http://www.amundi.co.jp/report/list/
Schroders ** Insights (<5m) http://www.schroders.com/ja-jp/jp/asset-management/insights/
鎌倉投信 運用報告書 (1m) http://www.kamakuraim.jp/yuidayori/
Barings * ファンドマネージャー・コメント(1m) http://www.barings.com/jp/InvestmentTrusts/investmentinformation/fmcomments/index.htm
Henderson Global Investor * レポート (<5m) https://www.henderson.com/jpii/posts-nohgi
しんきんアセマネ レポート (<20m) http://www.skam.co.jp/newest_report/
State Street
PGIM * outlook(<2m) http://www.pru.co.jp/
MFS ** insights(<10y) https://www.mfs.com/content/ja_jp/insights.html
East Spring
Franklin Templeton Investments * 市場見通し(<3m) http://www.franklintempleton.co.jp/ja_JP/investor/commentary/market-perspectives
J Research
Nomura Research Insitution * Financial Research Paper(<2m) http://www.nri.com/global/opinion/lakyara/index.html
日本総研 * 経済・政策レポート、経営コラム・レポート https://www.jri.co.jp/column/
大和総研 ** レポート http://www.dir.co.jp/research/
富士通総研 ** 研究レポート http://www.fujitsu.com/jp/group/fri/report/research/
PWC *** Reports (<3y) http://www.pwc.com/jp/en/japan-knowledge/thoughtleadership.html
日本ベル研究所 ** リサーチメモ、 http://belletk.com/
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Hedging on Hedge Funds

Some perspective about hedge funds from Clifford S. Asness, the founder of AQR Investment Management

 

Hedging on the Case Against Hedge Funds

http://www.bloomberg.com/view/articles/2016-05-12/hedging-on-the-case-against-hedge-funds

Hedging on Hedge Funds (postscript on correlations, beta, and “alpha”)

https://www.aqr.com/cliffs-perspective/hedging-on-hedge-funds-postscript-on-correlations-beta-and-alpha

Hedge Funds: The (Somewhat Tepid) Defense

https://www.aqr.com/cliffs-perspective/hedge-funds-the-somewhat-tepid-defense

 

Today’s pendulum that hedge funds are a failure and investors are fleeing went too far
[1]

3 sources for overreaction:

  1. failure to understand how to measure hedge-fund returns
  2. last few years have been a mild disappointment
  3. the backdrop of a raging debate about inequality

 

Not Alpha

Part of hedge-fund returns that is explainable by passive stock-market exposure are the result of unique manager skill (alpha), but

“a fair amount seems to come from relatively straightforward exposure to known strategies [2]”

 

– these strategies are not “unique alpha” and shouldn’t come with the famous 2 and 20 price tag

 

Judge hedge-fund returns

Hedge funds should underperform the Index since March 2009 because:

  • average hedge fund has always been, and still tends to be, “net long”, but less long stocks than the typical equity-mutual fund
  • Over the long haul, broad portfolios of hedge funds tend to move about 35 percent to 40 percent up or down with the stock market
  • therefore of course lagged backward in a gigantic bull market, they should be compared to the 35 percent to 40 percent of the S&P 500 [3]

 

perspective-10-14-eq-1

スクリーンショット 2016-08-08 22.54.10.pngThe “Compound Return” is annualized over the full 1994–2014 period.

 

The big concern

  1. hedge funds have become more correlated with traditional markets, especially given the likelihood that traditional asset classes now offer a lower long-term expected return than usual
  2. hedge funds as an industry are less aggressive than they used to be
    (a sign that the value proposition is weakening)

 

Beta and Correlation

Beta measures how much, on average, a fund responds to stock market moves, correlation measures how “tight” that response is

  • For a fund that is 10% long stocks and 90% cash, the beta of the fund is 0.1, but the correlation to stocks is 1.0 as stocks drive all the variability
  • For a real world example, a beta of 0.4 with stocks, perhaps being net long 40% stocks, but with doing massive other thing (“uncorrelated staff”), say additional offsetting long and short positions that don’t change your beta so that your 0.4 beta doesn’t tell you very much about your subsequent returns (i.e., a low correlation)
  • doing a lot of these other things their correlation with the stock market is lower than doing little of these other things
  • hedge funds are doing less of these other things nowadays and so this alpha (both attempted and realized) has been smaller making correlations (but not beta) go up

perspective-10-14-fig-3perspective-10-14-fig-4perspective-10-14-fig-6

 

Continue reading “Hedging on Hedge Funds”

The Values of Value Investing

3 blog articles from Institutional Investor

 

1.

The Values of Value Investing

http://www.institutionalinvestor.com/blogarticle/3568695/blog/the-values-of-value-investing.html#/.V6Pny5OLRE5

 

Ben Graham’s value investing

scrape off the bottom of the stock market abyss — what Warren Buffett calls the cigar-butt approach

statistical cheapness: single-digit PE, a discount to book value, or below their cash value

not scalable, and have not been available

 

Buffett and Munger’s value investing

Adding quality and growth to cheapness

“It was better to buy good businesses even if the price wasn’t dirt cheap”

The quality and growth dimensions may lack tangibility and are often difficult to quantify

e.g. A high-quality, mature company that already has a large market share in an industry with GDP-like growth, and its existing business generates a high return on capital, (but it cannot put this capital to work at high rates)

 

A review

It’s more like an inflation-protected bond:

investor will collect dividends that will grow with inflation

make or lose money on the stock price depending on the pendulum swing of PE multiplies around the fair value

par value will also appreciate in line with inflation

Today’s world:

investors are starved for yield, mature high-quality businesses trade like very, very expensive bond substitutes

low inflation, abundant money supply

focus on the ability to reinvest at a high rate in the future

Continue reading “The Values of Value Investing”

Technology’s Influence on the Economy

 

“It is usually a poor proposition to bet against human ingenuity”

 

The High-Tech Lever: Examining Technology’s Influence on the Economy

https://www.principalglobal.com/documentdownload/41193

 

Technological change and the problem of measurement:

Direct effects: GDP captures the value of goods and services produced in the economy like iPhone and the app charges

indirect effects: solves challenges, boost efficiency

e.g. incandescent light bulb 1) drove the creation of electrical infrastructure and other electrical appliances, 2) pushed factories to be safer and more productive, 3) even improved public health from reduced effects of carbon monoxide poisoning that had occurred with gas lightening

Cost though: some products and entire industries became obsolete or redundant
albeit also means the time, effort, and capital saved and new job created

 

Indirect effects:“cost of doing business”

technology can transform the “cost of doing business”

Technology boosts economic progress and productivity by turning economically unproductive belongings into revenue-generating assets (Uber or Airbnb)

and capital will be reallocated to more productive uses

now technologies in their nascent stages that could have a profound impact on capital allocation and economic forces in the future

スクリーンショット 2016-08-04 20.13.26

The future economics of cars:

1. A fleet of just 9,000 driverless vehicles could replace all of the taxi cabs (around 13,500) and other for-hire vehicles (about 44,500) in New York City
2. Passengers operating a shared driverless vehicles would wait an average of 36 seconds for a ride that cost $0.50 per mile while the current average price per mile for a private car is $3.57

The future economics of 3D printing:

1. produce a decentralized, on-demand manufacturing sector, meaning more efficient manufacturing processes, decreased production times and shipping costs, and even reduced greenhouse gas emissions
2. Economically, this would drive the prices of manufactured goods down further, allowing a great deal of capital to be redeployed

 

Indirect effects: non-tech industries

Agriculture has seen huge increases in production, decreases in water and fertilizer use, and more efficient land use, supported by technological change, including improved plant varieties, better irrigation methods, and mobile technology

population and supply in Malthus debate may be no longer a question

Social technologies could raise the productivity of high-skill knowledge workers by 20% to 25%, according to McKinsey & Company

attributes this to enhanced “collaboration and communication within and across enterprises.”

 

Indirect effects: emerging markets

Emerging markets may have to track a higher progress up the economic learning curve

access to technology that is growing more affordable by the day

Technology-enhanced productivity and education could become an imperative to remain competitive in the global economy (mobile phones in India and Africa)

 

Indirect Economic implications: Deflationary pressures

High-quality manufactured goods inundate the world and unlike the 2nd half of the 20th century, the world is entering a period where there is a structural excess supply of both manufactured goods and commodities

Technologically driven advances in utility and convenience, and reduced input and production costs

But deflation =/= recession [1],

1. improvements in features and product performance encourage people to upgrade in spite of price expectations.

2. growing middle class, with ever-larger pools of consumers able to purchase these goods that overwhelm the effects of wait-and-see deflation.

3. disappointing 2% growth in a time of improving quality in goods and services may be a good situation for consumers in the long run.

4. Instead of the continued, intense focus on real GDP, perhaps it is time for more analysis of nominal GDP

 

Implications for investors

Interest rates and bond yields will stay lower for longer than most commentators think.

(Besides technology, other factors like demographics also push rates dow)

Equities: more of a stock picker’s market

  1. Growth becomes far more valuable to investors in the absence of high interest rates, and hence, a high discount rate
  2. deflationary pressures will tend to choke off weak business models quite rapidly
  3. this environment would favor active management, (identify companies and business models that are susceptible to industry disruption and deflationary obsolescence
  4. at some stage, this trend could stem the proportion of assets invested on passive 

U.S.:

  1. remain a primary destination for capital in the near future, as economy is the once and future paradigm of technology (but effect of productivity can be global)
  2. U.S. companies with strong domestic earnings

More focuse on income, more prevalent in niche markets

  1. real estate, commercial mortgage-backed securities, municipal bonds, preferred securities, or emerging market debt are structurally and informationally less efficient

 

[1]

At its worst, deflation leads to economic stagnation and high unemployment because the expectation for lower prices in the future causes consumers to postpone present purchases, thereby slowing economic activity.

Quality over Quantity

A paper that discuss the topic of passive v.s. active from AB Investments

 

Quality over Quantity

https://www.abglobal.com/Research-Publications/CMA-created-content/Investments_US/Instrumentation/Quality-Over-Quantity.pdf

 

The common refrain: “Passive is cheaper and less risky”, but

Diversification

スクリーンショット 2016-08-03 19.35.38

Beyond a threshold of 20-35 stocks, the marginal benefit is largely reduced.

スクリーンショット 2016-08-03 19.53.00.png

Among US equity managers, those with 35 or fewer stocks tend to have higher active share and higher annualized rolling excess return over the last 5&10 years

By using research to focus on fewer but higher quality stocks, concentrated investing has the potential to produce substantial alpha

(however, it’s difficult to find how active a manager is. Managers can claim to be active but really run benchmark-hugging portfolios)

 

Hidden risk of Passive

スクリーンショット 2016-08-03 20.06.13.png

Passive portfolios would have followed along for the ride (market capitalization skewed), not only sectionally but also regionally (by the end of 1988, Japanese stock had grown to 44% of MSCI World index)

higher volatility, especially at market peaks, makes the true cost and risk

 

Concentrated investing may reduce downside risk

スクリーンショット 2016-08-03 20.16.20.png

Investors who stick with a concentrated approach over long run have been rewarded with better returns with less downside volatility

It makes sense to combine passive strategies with highly concentrated strategies that identify exceptional stocks

(But this time may be different?)

 

 

The role of Alternatives

A performance analysis on alternatives over 15 years conducted by PGIM

 

REVISITING THE ROLE OF ALTERNATIVES IN ASSET ALLOCATION

https://www.pgim.com/wps/wcm/connect/ec44ffeb-67ac-46b1-943f-8e3fdcf668d8/IAS-Alternatives-WP.pdf?MOD=AJPERES&CVID=loIAcq3&CVID=loIAcq3&CVID=loeQU-N&CVID=loeQU-N&CVID=lo9JokU

 

Through March 2009 ~ December 2015, US broad market equity indices returned more than 200%, far surpassing the gains made in most alternative strategies

some large public pension systems in the U.S have recently been trimming their hedge fund exposure.

スクリーンショット 2016-08-01 18.25.14

History

In the late 1980s, David Swensen in Yale pioneered the “endowment model”

Through strong manager selection and reallocation from traditional assets to alternatives, Swensen successfully generated outsized returns, prompting others to follow suit.

Minimal disclosure requirements and specialized investment mandates (that allow illiquid assets, leverage, short-selling, derivatives, and esoteric assets) provided the alternative managers a unique way to exploit market inefficiencies

Private equities to offer attractive risk-adjusted returns albeit with a high risk target and a long lock-up period.

Real estate to provide meaningful diversification to a portfolio with the stipulation of possible cyclical returns.

Hedge fund strategies, such as event-driven and relative value, to improve diversification and lower drawdown risk while generating robust alpha.

 

Performance and Diversification

This paper analyzed the role of these alternatives from the beginning of 2000 to Q1 2015 representing two full market cycles

スクリーンショット 2016-08-01 21.51.32

venture capital’s poor performance and large volatility stands out

equity hedge and fofs underperformed fixed income, which enjoyed strong performance over this sustained declining rate environment

alternatives, except for VC, produced better risk-adjusted performance than equities over the period studied

スクリーンショット 2016-08-01 21.52.05

 

macro and relative value had the lowest risk and drawdowns amongst alternatives over the period

スクリーンショット 2016-08-01 22.09.05.png

many alternative strategies, on average, have significant exposures to market betas. In contrast, real estate and macro hedge fund strategies offer better diversification.

almost all of these strategies had negative correlations to fixed income, given the strongly negative correlation between the US Aggregate and the S&P 500 (-0.36)

スクリーンショット 2016-08-01 22.17.22.png

macro hedge funds exhibited low correlation to equities during periods of stress such as during the height of the financial crisis

 

Beta or Alpha?

スクリーンショット 2016-08-01 22.19.25.png

returns of fofs, equity hedge, and event-driven hedge funds can to a large extent be explained by market beta factors (high R-squared values)

significant equity, size (small cap), and emerging markets factor exposures, which may explain the drawdowns these categories experienced during the financial crisis

real estate, as well as leveraged buyout private equity, had low exposures on market factors and owned the highest alpha (intercept)

real estate: active management and high current income
LBO: active management and management of distributions

スクリーンショット 2016-08-01 22.47.43.png

many of the hedge fund strategies generated stronger alphas in the earlier, as opposed to later years

macro demonstrated very strong countercyclical surges in alpha following both equity market downturns, shifting to a period of negative alpha only over the most recent period

 

Portfolio Construction

スクリーンショット 2016-08-01 22.54.41.pngスクリーンショット 2016-08-01 22.58.37

the introduction of 20% selected alternatives strategies (replacing equity) reduces realized volatility and dampens the maximum realized drawdown

the “risk-off” bucket is marginally more effective

スクリーンショット 2016-08-01 23.15.15.png

Investors should carefully consider the nature of the exposures that they are taking on, particularly within the context of their own objectives

the additional credit weighting might be an unintended result.

Additional Considerations

outcomes may vary significantly even within a subcategory and fee structures where alternative fee structures might evolve to better align investor and manager interests.

スクリーンショット 2016-08-01 23.25.35.png

Manager selection is critical, given the wide performance dispersion observed across many types of alternatives