Displaying items by tag: uncorrelated

The rapid growth of open-end funds investing in illiquid assets—like real estate, private equity, and credit—has introduced both opportunity and fragility, particularly due to stale pricing risks that can lead to wealth transfers between investors. 

Research shows that these funds often experience artificially smooth and lagged returns, which can mislead investors about actual performance and risk, enabling NAV-timing strategies that exploit predictable price movements. Spencer Couts and colleagues developed a more advanced return unsmoothing method to correct for spurious autocorrelation and better measure fund risk and performance, especially in highly illiquid private credit funds. 

However, interval and tender-offer funds help manage these risks by limiting capital flows and allowing managers to avoid forced sales or purchases of illiquid assets.

Finsum: Pooling capital through regulated open-end structures with controlled liquidity offers a more stable way to invest in illiquid markets.

Active ETFs combine professional management with the liquidity and transparency of ETFs, making them powerful tools for portfolio construction. They offer investors access to active security selection and the potential to outperform benchmarks, while still benefiting from intraday trading, tax efficiency, and often lower costs. 

These funds are especially valuable in areas of the market with inefficiencies, where deep research and targeted exposure can improve outcomes. Derivative-income ETFs can enhance portfolio income and stability by generating yield through options, offering an equity-based alternative to fixed income. 

Meanwhile, buffer ETFs help manage downside risk by capping losses (and gains) over set periods, making them useful for preserving capital during volatile markets. 

Finsum: Together, these active ETF strategies provide investors with flexible, diversified, and goal-oriented components for building resilient and adaptive portfolios.

The private equity industry is experiencing a shift towards greater accessibility for individual investors. Historically dominated by institutional participants, the sector is now witnessing the dismantling of barriers that once limited broader participation. 

This transformation is driven by the emergence of new investment vehicles and regulatory changes that facilitate entry for non-institutional investors. While this democratization opens opportunities for a wider audience, it also introduces challenges related to investor education and the management of liquidity in traditionally illiquid assets. 

Industry stakeholders are actively addressing these issues to ensure that the expansion of the investor base is both sustainable and beneficial. 

Finsum: Private equity is becoming an increasingly viable option for individual investors seeking diversification and potential returns.

Bitcoin climbed over 2% on Friday to $83,959, outperforming equities after China announced retaliatory tariffs against U.S. goods. While most major cryptocurrencies like Solana and Dogecoin also gained around 6%, crypto-related stocks such as Coinbase fell, though MicroStrategy rose nearly 4%. 

Analysts suggest the decentralized nature of crypto may insulate it from geopolitical shocks, potentially attracting capital away from traditional markets. 

Investors reacted sharply to escalating trade tensions, with China’s 34% levy mirroring Trump’s earlier tariff hike, further pressuring U.S. markets. Despite recent volatility, bitcoin has held steady in the $80,000–$90,000 range, showing resilience compared to stocks. 

Finsum: As global trade realigns and dollar reliance weakens, bitcoin is increasingly seen as both a liquidity source and a hedge against uncertainty.

Private equity markets, lacking transparent pricing, may be nearing a downturn despite their lack of observable bubbles. The influx of capital over recent decades has led to inflated valuations, with private equity assets soaring to $3.5 trillion by 2023. 

Rising interest rates threaten the industry, which thrived in low-rate environments, potentially leading to poor returns and capital shortages. Pension funds, heavily invested in private equity, face significant risks, impacting both retirees and taxpayers. 

The sector's rapid expansion could have long-term negative economic effects as it adjusts to new financial conditions. The deflation of the private equity market, although gradual, could still result in significant economic challenges.

Finsum: With a possible cut on the horizon there is still a possibility of sustainability.