The Paper Trail: Back to the Futures
Now that everyone's kids are back in school, it's time for investors to go back to school as well. With that in mind, here is some quality Labor Day Weekend reading with this month's installment of The Paper Trail, featuring:
- Fed Funds Futures and Bond Returns
- Shorting Bonds with Trend Following
- The Importance of Fundamentals
- Emerging Markets and the Ukraine Crisis
- Quantifying Direct Indexing's Tradeoffs
- The Relationship (or Lack Thereof) Between Value and Interest Rates
- And Much, Much More!!
Does Farmland Belong in Your Portfolio?
This past weekend's issue of Barron's featured a piece from Lauren Foster on farmland investing with a few quotes from yours truly.
Agriculture is fascinating in the sense that it predates modern investing by multiple millennia and yet few investors have any material exposure to it in their portfolios.
From an investment standpoint, there's a lot to like about farmland - current income, capital appreciation, inflation-hedging properties, and low correlation to other asset types.
So with its rich history and attractive investment properties, why has it remained elusive to the average investor?
The Paper Trail: Predictably Bad Investments
Doth my eyes deceive me? Could it be?
Stocks AND bonds up in the same month?
Did we take a time machine back to 2021??? 😂
All kidding aside, let's hope that "as goes July, so goes the rest of the year"!
Please enjoy this month's installment of The Paper Trail, featuring:
- Predictably bad investments in VC-backed startups
- Long-term private equity returns
- Crypto regulation
- The "overnight effect" anomaly in equity markets
- Liquidity holes in financial markets
- The impacts of supply and demand on inflation
- And much, much more!
Are Alternative Investments and ETFs Compatible?
This past week I was a guest on my friend Nate Geraci's podcast, ETF Prime. In addition to hosting ETF Prime, Nate is President of the ETF Store and a co-founder of the ETF Institute. In short, he's forgotten more about ETFs by breakfast than I have learned in my lifetime.
In our ~20-minute conversation, we covered a lot of ground with an emphasis on the alternative asset landscape and the role of alts in a portfolio. Given Nate's background, the question naturally came up:
Are Alternative Investments and ETFs Compatible?
While the obvious answer would seem to be 'yes' given how ubiquitous ETFs are today as the default product choice for millions of investors, the reality is not so cut and dry.
Looking to add something to your podcast queue for your 4th of July holiday weekend travels? Say no more, fam. I got you covered.
Earlier this week, I joined Lauren Foster, Senior Writer at Barron's, for a fun 30-minute chat about the role of alternative investments in asset allocation...
The Paper Trail: Breaking Beta
We're "halfway there" through 2022 and, like Bon Jovi, many investors feel like they are living on a prayer.
It's been the worst first half of the year in my lifetime for the classic 60/40 portfolio, down nearly 20 percent year-to-date.
In the rare occurrences when 60/40 portfolios are in drawdowns of this magnitude, it typically means that stocks are down significantly more and bonds are somewhat hanging in there. Not the case this year, with the Bloomberg U.S. Aggregate Bond Index down double digits this year as well.
You'd be forgiven for thinking that "market beta" - by which I mean traditional stock and bond market exposure - is broken in light of the current backdrop. But I would argue they are merely bent, not broken. That said, investors have more options than ever before to break free from relying on traditional beta alone and can instead augment them with an ensemble of valuable, diversifying strategies. But I digress...
Alternatives in Action
The question often comes up from readers and prospective clients of Savant:
What do alternatives look like in practice for a typical client portfolio at your firm?
While there is no such thing as a "typical" client portfolio, there are some common threads as it relates to the types of alternative investments we incorporate across the households we serve.
With that in mind, our investment team at Savant has authored a hot-off-the-press white paper on alternative investments that is available to download on our website.
The Paper Trail: An Expensive Free Lunch
As I publish this, I was supposed to be on a plane to Ft. Lauderdale for the Wealth Management EDGE/Inside ETFs conference. Unfortunately, Covid had other plans and I am now stuck at home. Seems like we're all destined to get our turn sooner or later...
Regardless, I wasn't about to allow a little Covid to interrupt my streak of (now) 23 consecutive monthly Paper Trail posts! So, without further ado...
Is Innovation Investable?
If you're a regular reader of The Paper Trail, you know by now that I am Kai Wu's #1 fanboy. Kai is the founder & Chief Investment Officer for Sparkline Capital and his papers are a staple in my monthly research compendium. He is prolific when it comes to applying novel approaches (unique data sets, machine learning) to classic investment frameworks (i.e. value investing) in areas where the old rules may no longer apply. Think intangible assets and crypto/Web3.
His latest published work is titled Investing in Innovation and it was so good I just couldn't wait until the end of the month to highlight it.
The Paper Trail: Private Party
2021 was a banner year for private equity: new records in deal value and exits, the second-best fund-raising year ever, and a continuation of the strong returns that have outpaced other asset classes.
But can the party in private markets continue in 2022 and beyond? It's definitely a question worth examining with private markets likely to play a more substantial role in the portfolios of high-net-worth investors in the years to come.
In addition to private equity, this month's installment of The Paper Trail digs into:
- Litigation Finance
- Value in Japanese Equities
- The Upward Migration of ESG Ratings
- Information in Municipal Bond Yields
- The Momentum Factor's Woes
- And much, much more!
UniFi by CAIA™
As alternative investments continue to broaden in their accessibility and play a more meaningful role in the portfolios of the future for individual investors, financial advisors will by necessity need to develop their competencies in this arena.
It is with that notion in mind that I am proud to announce I will be serving on the advisory council of UniFi by CAIA™, a just-announced learning platform dedicated to educating the private wealth management industry on alternative investments.
The Paper Trail: Rate Expectations
There's no sugar coating it - it's been a brutal start to the year for bonds. The Bloomberg U.S. Aggregate Bond Index is down nearly 7 percent year-to-date.
The conventional wisdom of building a balanced portfolio is being challenged before our very eyes. If there was ever an environment to demonstrate the value of diversifying your diversifiers, this is it.
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