The choice between specialization and generalization has evolved in the investment profession over the past 75 years. Specialization has become a necessity in modern finance due to factors such as internationalization, new asset classes and products, industry concentration, and quantitative investing. Generalists still play an important role in boutique investment firms and in coordinating efforts between specialists. The optimal skillset … Read More

Key Points: The risks of nuclear conflict have become more apparent in the wake of Russia’s attack on Ukraine. Investors should not dismiss the importance of financial stability in the face of nuclear conflict. Implementing risk controls, such as diversification and monitoring counterparty resilience, is crucial. Sustainability considerations, like the UN Sustainable Development Goals, highlight the need to reduce nuclear … Read More

Key Points: Private capital firms accumulate wealth regardless of the risk-return trade-off of their portfolios. Fund managers offload investment risk by diversifying their investments and limiting their losses through co-investment. Private equity firms can tilt the balance in their favor by using leverage, but this can also increase the likelihood of default. The private capital wealth equation relies on management … Read More

Key Points: Equities allow for the reinvestment of earnings, unlike other asset classes like bonds, real estate, commodities, and cryptocurrencies. Companies can choose to distribute a portion of their profits as dividends or buybacks, while the rest can be reinvested in the business. Equities offer the potential for superior compounding due to the reinvestment of earnings. The median quarterly return … Read More

Asset owners are building multi-generational, long-horizon portfolios PGGM is transitioning to a 3D framework that integrates risk, return, and impact PGGM plans to direct 20% of its investment portfolio to helping achieve the UN Sustainable Development Goals (SDGs) by 2025 CPP Investments focuses on the sustainability of the plan itself and its long-term financial standing CPP Investments leverages its long-horizon … Read More

Key Points: The fiscal theory of the price level (FTPL) explains inflation as a result of excessive government debt that cannot be repaid through future taxes or spending reductions. Inflation occurs when people anticipate that government debt will not be repaid, leading them to spend the debt rather than hold onto it. The current inflation episode can be explained by … Read More

Key Points: The slowing global economy can be attributed to central banks’ love affair with artificially low interest rates. Low interest rates promote malinvestment, bloated asset prices, financialization, and the “zombification” of companies. The effects of low interest rates have led to increasing inequality and the rise of authoritarian populism. Elderly retirees benefit from inflated asset prices, while young savers … Read More

“Shortly after October 6, 1979, [US Federal Reserve chair Paul Volcker] met with some chief executives of medium-sized firms. . . . One CEO announced that he had recently signed a three-year labor contract with annual wage increases of 13 percent — and was happy with the result. Only bitter experience would purge inflationary expectations and behavior. ‘Credibility’ had to … Read More

Key Points: Financial advisers offer unique value that clients cannot achieve on their own. Advisers help manage emotions and control biases. They provide access to resources, such as investment opportunities and specialized expertise. Advisers serve as sounding boards and actively listen to their clients’ concerns and goals. They excel at explaining complex financial concepts in easy-to-understand language. Advisers become trusted … Read More

Key Points: Low-income workers, women, and people of color tend to have less access to retirement plans and accumulate fewer retirement plan assets. To address these disparities, three primary methods are proposed: automatic plan design features, creative matching contribution formulas, and innovative education strategies. Automatic enrollment, minimum contribution levels, and stretch-matching can improve retirement outcomes for employees. Comprehensive financial education … Read More