Key Points Analyzed the premium valuations of MNC subsidiaries in India relative to their overseas parent companies. Examined the current valuations and calculated the implied future growth in cash flows. Calculated the differential growth rates in free cash flows required for Indian MNC subsidiaries to justify their higher valuations relative to their parents. Compared EV/EBITDA multiples for MNC parents and … Read More

We live in an era of responsible and sustainable investment, with environmental, social, and governance (ESG) considerations assuming ever-increasing importance and priority in investment decision making and portfolio construction. Between 2014 and 2018, the total value of “sustainable and responsible” investment assets in the United States grew at a compound rate of 16% per annum to $11.995 trillion, or 25.7% … Read More

Long or Short Volatility? I once worked as an equity derivatives intern at Credit Suisse First Boston in London. As at other investment banks, the team had three distinct types of members: salespeople, traders, and structurers. The latter were almost exclusively polymaths from the top French engineering schools who had few job opportunities in Paris but surprisingly well-compensated ones across … Read More

Key Points : “The Market Moved” news is irrelevant because single day moves rarely tell us anything about the direction of the market. News about ultra-rich individuals losing or gaining billions due to market moves is insignificant and doesn’t affect the market value of our wallets. Articles focusing on missed investment opportunities like “If you had bought…” serve no purpose … Read More

Key Points Responding to consultation papers is crucial for advocating for investor protection, transparent corporate reporting, and financial market fairness. Feedback on consultation papers helps in shaping the policies and regulations of the financial sector. Advocating for ethical markets and professional standards is essential for the growth of capital markets. Consultation papers in Singapore are often circulated by the Monetary … Read More

Key Points Trustees play a critical role in the governance of pension funds and endowments, and their relationship with portfolio managers significantly impacts performance. Achieving Investment Excellence provides a comprehensive guide for trustees and board members, focusing on practical aspects of pension governance. The book is divided into five key sections: the role and mission of pensions, designing the process, … Read More

Key Points Traditional portfolio theory may not always align with an individual’s true objectives. Goals-based utility theory bridges the gap between normative and behavioral finance. Behavioral finance predictions do not provide specific guidelines for aspirational goals. Goals-based investing involves using financial markets to achieve real-world objectives. Franklin J. Parker, CFA, is the author of Goals-Based Portfolio Theory, published by Wiley. Imagine for … Read More

Accounting decisions involve significant judgment, and US GAAP gives firms the discretion to choose among alternative accounting methods. Investors are not thrilled when firms make accounting choices that are atypical for their industry, and lower accounting comparability relative to peers leads to lower stock market valuation of earnings. Low accounting comparability can be costly for both firms and managers, as … Read More