INDICES & MANAGEMENT STYLES - Professional Wealth Management

Issue 106 (December/January) VIDEO & AUDIO Archive PWM Asia Archives

Archive » 2003 » INDICES & MANAGEMENT STYLES

‘The concept that higher risk active managers generate proportionately higher returns appears to be a myth’ David Wonn, Invesco

Time to review risk and return

03 November, 2003

Research findings are showing that there is a greater likelihood of generating robust returns from a low tracking error approach than from a higher one.

In today’s uncertain environment, the managers who focus on low tracking error strategies and who have historically managed to a tight “risk budget” have been gaining attention from both index-oriented investors and those focused on traditional active management strategies. Given the increased level of interest and the attractive performance attributes of these approaches, we wanted to provide investors with more information on this unique corner of the market.

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‘It is little surprise that some of the smaller sector ETFs have already gone to the wall’ Markus Hübscher, Credit Suisse Asset Management

Late off the blocks in Europe, but gaining ground

03 November, 2003

The market for ETFs on this side of the Atlantic may only have got going
three years ago, but in 2003 it is on track to double in size yet again.

Exchange-traded funds (ETFs) have been one of the fastest growing areas in the European asset management industry in recent times. While these products have been available in the US for several years, their introduction in Europe only started in 2000.
Since ETFs became available in Europe, assets under management in this new and innovative investment vehicle have risen to over $16bn (e14bn). (See Chart 1.)

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‘Mid cap stocks get 30 per cent less coverage by Wall Street analysts than their large cap counterparts, leaving more pricing efficiencies to be uncovered and exploited’ David Schofield, Janus International

Hot tips on market ‘sweet spot’

03 November, 2003

Investors are beginning to notice that the under-researched mid cap asset class – especially around the $1bn–5bn mark – can offer a winning combination of upside potential and limited downside risk.

Imagine a racehorse which, for 10 years, wins more races than any of its rivals, but is hardly ever bet on by the public – seldom even by professionals – and gets only minimal coverage in the racing pages.
Implausible certainly, but this is exactly what has happened in the investment world. Mid cap value beat all other US equity asset classes over the 10 years to 2002, according to Lipper statistics, and yet it accounts for only 2.9 per cent of invested equity assets. (See Charts 1 and 2.)

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‘With the arrival of the euro in 1999, there has been a gradual demand for indices and products that expose investors to the performance of the eurozone’ Ade Cordell, Euronext.liffe

Alternative indices arrive at long last

03 November, 2003

Demand has been high for indices that reflect recent currency changes in the trading marketplace and the broader European landscape.

Today’s market conditions and Europe’s expanding horizons require new index products. The main European index, for example, is now over five years old – predating both the euro and the end of the 1990s bull market.

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