1. Tuesday, April 25th, 2017
    site visits

    In my work as a consultant advising investment organizations, I generally get access to the people that I would like to interview and am able to see the things that I would like to see.  That degree of openness is uncommon for others doing site visits (for the purpose of evaluating an investment in company, for example, or the selection of an asset manager), who face a more daunting challenge.

    While those visiting are hoping for helpful transparency to aid in their analysis, those being visited are also trying to manage the encounter to their advantage.  One side is trying to create a narrative and the other should be focused on cracking it.the research puzzle | I wrote about creating the narrative versus cracking the narrative in this 2014 piece.  The success of a site visit by an analyst depends upon how that struggle unfolds.

    Sometimes, virtually all of the interaction takes place in a conference room, with a limited number of people involved, and much of the information is ... continues

  2. Monday, March 13th, 2017
    circles of risk

    In October 2009, McKinsey Quarterly published an article with the intriguing title “Risk: Seeing around the corners.”McKinsey Quarterly | It was written by Eric Lamarre and Martin Pergler.  A few months earlier, the world was convulsed by the financial crisis, so the title that accompanied the graphic below — “Companies are susceptible to interconnected cascades of risk” — seemed obvious.

    mckinsey risk

    The article was written for the leaders of companies, so the risk triggers identified are oriented to the bottom line of company operations.  That framework could just as readily be used by a fundamental analyst at an asset management firm who is trying to anticipate the affects of various risks on the companies she covers.  The listed risks are all over the place:  some slow-moving, others that can show up overnight.  Depending on the business models in question, they could be negligible in potential impact for one firm and devastating for another.  And, ... continues

  3. Tuesday, February 7th, 2017
    point of view

    If you are of a certain age and have attended a significant number of plays and concerts in your time, something is easy to remember about any one of them:  where you were sitting and what the scene looked like from your perspective.

    The details fade over time, but a general impression remains.  And that impression is anchored in your location and your point of view.

    Recently I attended The Front Page on Broadway, a production featuring a handful of big names and a number of recognizable faces who have supplemented their theater work with appearances on Law and Order and other television shows.

    I happened to get a ticket in the front row.  When John Slattery made his entrance and slid a suitcase across the stage, I thought it was going to end up in my lap.  I was one of only a couple of people in the theater for whom it was a possibility.  (It didn’t happen.)

    In fact, although I saw the same play as those in other seats, I saw it in a different way.  Neither better nor ... continues

  4. Tuesday, December 6th, 2016
    the investment ecosystem

    I first wrote the phrase “the investment ecosystem” in one of these postings more than eight years ago.  It has appeared often since then and, when counting emails, presentations, and meetings, the total number of times I have used those words is well into the thousands.

    In my consulting business, I work with a variety of investment organizations, including asset managers, institutional asset owners, investment advisory firms of various kinds, research organizations, consultants, etc.  By doing so, I get a multidimensional view of that ecosystem and of its evolution over time.

    We are at an important stage of that evolution.

    Over the past several decades, the investment industry has thrived.  Despite some significant hiccups along the way, the market environment has been relatively benign, with a secular trend of disinflation leading to the low interest rates and generally high equity valuations that we enjoy today.  Globalization, favorable demographic changes, the ... continues

  5. Thursday, October 20th, 2016
    watching the flows

    It has become a monthly ritual to scrutinize the amount of money gushing out of actively-managed funds and into passively-managed ones.Morningstar | Here’s the latest monthly summary from Morningstar.  Asset managers are rightly concerned about the persistent trend.  It feels like twilight, following four glorious decades of managing other people’s money.

    I’ll leave the dissection of that to others, at least for now.  (I will soon be writing a white paper on critical issues for asset managers to address in today’s environment, which will be distributed via my “investment ecosystem” listThe Investment Ecosystem | Sign up on the site to receive the white paper.).  Instead, this posting considers some other critical aspects of asset flows.

    As the available research shows (and anyone with experience in the business knows), flows follow performance.  To varying degrees, it is true in every part of the investment world.  Individuals and ... continues