Key Points: The recent bankruptcy filing of FTX, a major cryptocurrency exchange, highlights the speculative nature of cryptocurrencies. Cryptocurrencies suffer from two major problems: the lack of supply constraint and the reluctance of central banks to adopt them as a viable form of reserves. The concept of supply constraint in cryptocurrencies is undermined by the ease of replicating the technology … Read More

Key Points: The hit rate, or the percentage of decisions that make money, is an important metric for portfolio managers. However, a good payoff ratio can compensate for a low hit rate. Peter Lynch emphasized the importance of payoff, stating that one or two good stocks a decade can make a significant impact. Payoff is often overlooked by asset owners … Read More

Key Points: FTX is not a reflection of the flaws in crypto but rather a symptom of the larger issues inherent in traditional finance. Crypto technology offers the potential for a more secure and transparent financial system. The fractional reserve banking system, common in traditional finance, is prone to fraud and banking crises. Regulation and monetary policy cannot effectively address … Read More

The Federal Open Market Committee (FOMC) implemented corporate bond purchase programs to support corporations’ access to credit and improve liquidity in the primary and secondary corporate bond markets during the COVID-19 pandemic. These programs had a significant impact on liquidity and valuations in the investment grade market, as well as stabilizing the high-yield market. The Fed’s interventions boosted investor confidence … Read More

The rapid growth of environmental, social, and governance (ESG) indexes continues, with fixed-income-focused ESG indexes leading the way. The number of ESG indexes grew by 55%, with fixed-income ESG indexes increasing by 95.8%. Asset managers are implementing ESG criteria within fixed-income investments, with 76% of managers incorporating ESG in this asset class. The growth of fixed-income indexes outpaced that of … Read More

– The US Federal Reserve took swift action during the COVID-19 pandemic to provide liquidity and prevent a cross-market domino effect. – While these interventions helped stabilize the economy in the short term, there are concerns about the long-term effects and vulnerabilities of the financial system. – Global debt has reached a record high, creating greater systemic risk, especially with … Read More

– Tax planning should be a year-round consideration for high net worth clients to maximize savings. – High net worth individuals often overlook opportunities to minimize their taxes due to time constraints or lack of strategic tax advisory teams. – Investment advisers and wealth managers can add significant value by considering fees, expenses, tax costs, and long-term returns when advising … Read More

Fund managers may be tempted to selectively report performance metrics that reflect favorably on their performance. The correlations between major performance metrics, such as Sharpe, Treynor, information, and Sortino ratios, have remained consistent over time. If a fund manager only highlights certain performance metrics and excludes others, it could suggest strategic reporting. Managers could strategically report Sortino or information ratios … Read More

Key Points: Alternative investments are experiencing significant growth, with assets under management expected to reach $23 trillion by 2026. Private equity funds can manipulate valuations to appear uncorrelated to equities, making them attractive to investors. Correlations are essential in alternative investments, but there may be hidden risks beneath the surface. Some hedge fund strategies have low correlations to traditional asset … Read More