24 Oct 2016

Prerequisites for Alternative Investments

One of the more popular categories of mutual funds over the past few years have been so-called ‘alternative’ funds.  Alternative investments, broadly defined, are strategies that seek returns that are uncorrelated from traditional investments like stocks and bonds. While alternative investments were once largely confined to private partnerships, they are now popular in mutual funds, or what the industry refers to as ’40 Act Funds.  Following the 2008 financial crisis, alternative… Read More

By David Ott Tags: , ,
3 Oct 2016

Two Lessons from the Third Quarter

Even though the first day of fall was on September 22nd this year, it’s only when we enter the fourth quarter that I start to think about the changing leaves, shorter days, corduroy pants, flannel sheets and raking the leaves. I do love summer, which I mentally compartmentalize into the third quarter and 2016’s was particularly enjoyable given the strong market performance across the board. The chart below includes the… Read More

By David Ott Tags: , , ,
23 Aug 2016

Allocating to Risky Assets

What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent.  (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More

By David Ott Tags: , , ,
19 May 2016

Yield Curve Swiftly Shifting

When looking at the shape of the yield curve it’s easy to see that a lot has changed. Low yields overall have certainly pinched bond investors and made them look elsewhere for returns, but not all investors are so flexible. For banks who are restricted in terms of the investments that they are allowed to hold, the decision of where in the bond market to invest is an important one… Read More

By Cliff Reynolds Tags: , , ,
13 May 2016

Forced Sales are Fire Sales

Acropolis diversifies in more ways than you may realize.  In addition to the well known methods like single company exposure, sector, industry, geography, creditworthiness and asset classes, we also diversify by risk factors. I’ve written about the equity factors that we use (see a list of our primers on size, value, momentum and quality here), but I think it’s also important to note that there are some factors that we avoid…. Read More

By David Ott Tags: ,
11 Apr 2016

Watching Your Fellow Shareholders

When you own individual stocks and bonds, you don’t have to pay too much attention to what your fellow shareholders (or bond holders) are doing. A mutual fund is a little different, though, because the actions of your fellow shareholders can affect your returns, especially on an after-tax basis. Morningstar reported last week that of their 500 most widely followed mutual funds, 168 have seen outflows of more than 10… Read More

By David Ott Tags: ,
31 Mar 2016

When to Head for the Exits

Back in November, I wrote about the Sequoia fund (ticker symbol: SEQUX) on the losing side of a big bet on Valeant Pharmaceuticals (ticker symbol: VRX). Sequoia is a well-known fund, in part because when Warren Buffet unwound his hedge fund in the late 1960s, he recommended that his clients go to Sequoia, which was run by his friend Bill Ruane.  Sequoia had good results and wasn’t afraid to take… Read More

By David Ott Tags:
23 Nov 2015

A Free Lunch for Thanksgiving

Back in May, I wrote about the 13D Activist fund (ticker: DDDIX), which buys stocks that are popular among activist hedge funds like Nelson Petlz and Bill Ackman (click here for my article). Although I did say that it wasn’t a great fund for Acropolis, I thought it was interesting because it had actually delivered alpha – returns that couldn’t be explained by factors like value, momentum, size and quality…. Read More

By David Ott Tags:
3 Nov 2015

Value Stocks Don’t Party Like it’s 1999

I haven’t seen or read much about it, but this is a very tough time for value investors.  In fact, to my surprise, it hasn’t been this bad for value investors since the late 1990s tech bubble. Although you can find the same thing if you look at commercial indexes from companies like S&P, Russell and MSCI, the following data from academic Ken French tells the whole story.  While useful,… Read More

By David Ott Tags:
9 Oct 2015

The Right Time Horizon for Stocks

When people ask me how long their time horizon ought to be when investing in stocks, I usually say 10 years.  It occurred to me the other day that either I’ve never really looked into this in a very detailed way or I’ve forgotten about it.  In either case, it’s now time to look. To answer this question, I looked at rolling returns for the S&P 500 since 1926 for… Read More

By David Ott Tags: , ,