Ray Dalio’s Bridgewater is the latest celebrity investment management firm to opine that in a low-interest rate environment government bonds not only offer little in the way of value for investors, but that their ability to provide risk reduction during financial stress will be impaired as well. As this article from Bloomberg reports, Bridgewater is…
Tag: strategy
Seeing Around Corners
Inflection points for a business or industry often appear as if they happen overnight and without warning. While these massive shifts seem to be random, Rita McGrath in her book “Seeing Around Corners” contends that there are a number of different ways that businesses can spot these inflection points and guard against becoming the next…
Avoiding the Zeros
Games involving strategy can be classified into two buckets: winner’s games or loser’s games. The difference is that a “winner’s game” victor utilizes superior maneuvers to overwhelm opponents, whereas a “loser’s game” victor avoids fatal errors and self-sabotage. Investing has been labeled the latter type, discussed further in a recent article titled “Avoiding the Zeros.”…
The Cost of High-Frequency Traders and Latency Arbitrage
A new study released by the Financial Conduct Authority (FCA) in the U.K. has reignited concerns around the ability of predatory high-frequency traders (HFTs) to profit on equity trades by using a technique called “latency arbitrage.” Latency arbitrage is a practice used by HFTs that utilizes a fragmented market structure and speed to “snipe” stale…
The Man Who Solved the Market
Until recently, stories about the investment management firm Renaissance Technologies and its flagship Medallion fund were relegated to hedge fund mythology and investor folklore. Unverifiable anecdotes around performance numbers trouncing the S&P 500 left many wondering if the team at Renaissance had managed to “crack” financial markets and whether the rumors were too good to…
What We Can Learn from Poker About Investment Management
Investing and poker have a lot in common. Both involve a balance of known and unknown information, and both involve updating probabilities when new information is presented. One might suggest investing is slightly trickier than poker given that the “rules” of the game can adapt over time, but at a high level both share a…
How to Overcome Home Country Bias in Investing
Home country bias is when an investor has more of their portfolio allocated to financial securities domiciled in the country in which they reside than what global market value proportions would dictate. While home country bias is pervasive across the globe, Canadian investors are typically more prone to this phenomenon. Studies suggest anywhere between 50-60%…
Why You Should Expect Some Underperformance
Investment managers that employ trend-following strategies have had a challenging few years. Though not as significant as the underperformance realized by the value factor (relative to the growth factor), the last eighteen months of sideways, volatile price action in global equity markets has some pioneers of trend-following strategies questioning whether the strategy is still viable….
The Moral Animal – Why We Are The Way We Are
For those interested in human psychology and how evolutionary forces can influence the way individuals make decisions, The Moral Animal – Why We Are The Way We Are by Robert Wright is a fascinating read. It explores the science of evolutionary psychology, examining the historical context around how the theory of natural selection was conceptualized…
What to Do in Periods of Underperformance
Underperformance for investment managers is a tricky topic of discussion. When managers acknowledge a period of underperformance, it can be misconstrued by investors as accepting defeat. In reality, it is inevitable that every good investment strategy will experience a period of underperformance. Sticking with a strong investment strategy that is going through a period of…