Last year was a terrible year for the markets, even for many hedge funds. According to investment data firm Preqin, hedge fund returns were down 6.5% in 2022, the largest drop since the 13% decline in 2008 during the financial crisis. That’s why global hedge fund managers are preparing for persistent inflation by seeking exposure to commodities and bonds that perform well in inflationary environments. A majority of 10 global asset and hedge fund managers that were surveyed by Reuters said commodities are undervalued and should thrive as global inflation stays elevated this year. In addition, they are also seeking inflation-linked bonds to shield against price rises, and exposure to certain corporate credit, as higher rates restore differentiation in company bond spreads. For instance, London-based hedge fund manager, Crispin Odey is betting inflation will remain high. He told Reuters that "Commodities will start to rise again. They've sold off very heavily and are below operating costs in many instances." Danielle Pizzo, chief strategy officer at Schonfeld Strategic Advisors, told Reuters that her firm “Aims to focus more on investment grade and high-yield bonds this year as well as commodities.”
Finsum:Hedge funds, which saw the largest drop in performance last year since the financial crisis, are concerned about persistent inflation and are seeking exposure to commodities and select bonds.
A recent survey found that investors are concerned about their retirement prospects and it’s easy to understand why. A combination of volatility, inflation, and recessionary fears is driving investors to check their retirement balances multiple times a week. Clients are certainly also voicing their concerns to their advisors. With both the equity and the fixed income markets seeing steep declines, there haven't been many places to hide unless an advisor has been employing some type of Relative Strength strategy. By focusing on Relative Strength, also known as momentum, an advisor can remove emotion and subjectivity from their investment process and potentially see higher returns for their clients even in market environments such as this.
For over 30 years, Nasdaq Dorsey Wright has created many innovative technical indicators based on momentum using Point and Figure charting. One of the most popular is the “Technical Attribute” rating. Their research has shown that a high attribute portfolio, which includes ratings of 3-5, has a strong propensity to outperform, with the largest outperformance reserved for the highest ratings. The technical attribute ratings are composed of five distinct Point and Figure chart attributes, including four relative attributes (two vs. the market and two vs. the sector), and one absolute attribute (trend). The absolute attribute is typically useful in limiting the downside, as a purely relative approach can leave a client exposed when everything is moving down at the same time. In a year, when only one sector (Energy) has a positive year-to-date price return, employing the “Technical Attribute” rating can help advisors make their clients feel more comfortable about their retirement prospects.
In a recent article for U.S. News & World Report, Cameo Roberson, founder of Atlas Park Consulting, offered six networking tips for advisors to get great results. Her first tip is to make a good impression to win prospects. She wrote that “Networking can happen when you least expect it,” which means it's important to be friendly, but not be too intrusive in determining whether a person wants to discuss their financial plans. Her second recommendation is to offer value to networking partners. She wrote, “Be a good resource and keep your word to people in your network. As time goes on, you'll build up a reputation as someone they can count on.” She also recommends normalizing the sharing of referrals by creating a system such as writing a note to share with colleagues that clearly describes who you'd like to be introduced to. Roberson also recommends growing your network through business partners. This includes developing a short list of firms that you have built relationships with. This creates a path to possible future referrals since some clients aren't a great fit for every firm. Her fifth recommendation is to build a clear strategy. Roberson recommends thinking outside the box and beyond traditional contacts such as accountants and attorneys. Her final tip is to move with intent and be consistent, meaning that you must implement any plan you create.
Finsum:Advisor consultant Cameo Roberson offered six tips for networking, including making a good impression, offering value to networking partners, normalizing the sharing of referrals, growing your network through business partners, building a clear strategy, and moving with intent and being consistent.
After a tough year for the markets, asset managers are bracing for cost-cutting in 2023. Revenues were down across the industry last year as falling markets hit both management and performance fees. In the U.S., total assets in mutual funds and ETFs dropped 17 percent between the start of 2022 and the end of October, according to data from the Investment Company Institute. This will force asset managers to cut costs and make tough decisions this year about how to grow. Some asset managers are predicting that the downturn will accelerate the shift by clients from mutual funds and brokerage accounts to other ways of investing, such as ETFs, separately managed accounts, and model portfolios. Martin Small, head of BlackRock’s US wealth advisory business and the firm’s incoming chief financial officer, told Financial Times, “Whenever there are super shocks in the market, people make big changes to their portfolios. This is when people do deferred maintenance. In U.S. retail markets, there is a move from brokerage accounts to fee-based advisory, which means more model portfolios and more ETFs.”
Finsum:After a tough year in the markets, some asset managers are predicting a shift towards model portfolios, ETFs, and SMAs for clients.
Self-directed everyday investors (as well as advisors) are getting access to some pretty powerful tools. Listen to Jack Swift discuss how TIFIN uses AI to identify signals to improve the whole experience.