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Articles by OFI Global
Navigating Downside Risks, Upside Surprises With Rising Rates
Navigating Risks and Surprises with Rising Rates By Erik Norland, CME Group AT A GLANCE Geopolitical risks and higher commodity prices may complicate the pace of U.S. rate hikes. Inflation remains a central issue for the Federal Reserve and U.S. economy. With global economic uncertainty at the forefront, many investors are still pricing between four and six Federal Reserve rate hikes in 2022 and another couple in 2023.
Zee To Hold Egm Sought By Invesco, Ofi Global China, Rules Bombay High Court
Zee Entertainment Enterprises Limited (ZEEL) was on October 21 ordered by the Bombay High Court to hold an extraordinary general meeting (EGM) requisitioned by its shareholders Invesco Developing Markets Fund and OFI Global China. The EGM will be chaired by a retired judge and its resolution is to be kept in abeyance till the Bombay HC decides on the legality and validity of EGM requisition, the court ruled.
When EBITDA Is Just BS
One of the trends that you’d have been hard pressed to miss over the past decade has been rising valuations across virtually all markets. Developed and emerging, equity and credit, public and private —prices for everything have marched inexorably upward. In private markets, the most commonly cited measure of average valuation is called the EBITDA multiple.
When Diversification Does More Harm Than Good
Harry Markowitz, the creator of modern portfolio theory, is credited with saying diversification is “the only free lunch in finance.” He showed that by adding risky assets that are less than perfectly correlated with each other to a portfolio — the less correlated, the better — you can reduce total portfolio risk without reducing returns. In some cases you can even increase portfolio return while still lowering risk, the holy grail of investing.
The Amazon of 2030
In December 1999, Amazon.com’s stock reached a tech-bubble peak: At $106.70 per share, the company held a market capitalization of $36 billion, and earned $1.6 billion in revenue for the calendar year. The market believed Amazon and other internet darlings would one day rule the world. Two years later, the markets felt decidedly different about Amazon. By then, the stock had dropped 95 percent to a trough of $5.97 per share; its market cap was $1.7 billion.
New Zealand’s Sovereign Fund Reckons With a Massacre
People gather to honor the victims of the Christchurch terrorist attack outside the Kilbernie Mosque in Wellington, New Zealand. (Mark Coote/Bloomberg) Following the devastating terrorist attacks in Christchurch, New Zealand is undergoing a period of reflection on issues including hate speech, racism, gun ownership, and the role of social media.
Why David Swensen Is the Roger Federer of Investing
Illustration by II (Photo by Craig Warga/Bloomberg) In his seminal 1975 research paper “The Loser’s Game,” Charley Ellis likens investing to tennis. Ellis is the founder of Greenwich Associates, a prolific author, a long-time member of Yale’s investment committee, and a staunch proponent of indexing. Tennis, as he describes, is two different games. Amateurs play a loser’s game, in which unforced errors far exceed winning shots, and the outcome of the game is determined by the actions of the loser.
How Good Science Can Weed out Bad Managers
Illustration by Jeremy Leung/II In The Logic of Scientific Discovery, Austrian philosopher Karl Popper argued that the only way of truly testing a hypothesis was to form a view and then search for evidence that could empirically falsify the hypothesis, as opposed to looking for evidence to support it. You can never prove something right, but you can certainly prove something wrong.
The Closest Thing to White Supremacy I’ll Ever Get to Write About
I’ve always wanted to write an article about a white supremacist managing an ESG fund. This story might be as close as I get (until Institutional Investor underwrites my use of facial recognition software so I can go through the video footage of Charlottesville to find marchers who work in our industry). On March 12, 2019, 50 people — including William E.
The Bad Old Days at Merrill Lynch
I am not quite old enough to have personally known Messrs. Merrill, Lynch, Pierce, Fenner, or Smith, but I did have a brief flirtation with the firm that once bore their names. The recent Bank of America rebranding announcement came as no surprise to me — in my checkered past I was acquired by the mouthful of a firm known 10 years ago as Morgan Stanley Smith Barney. Two years later, the “Smith Barney,” hanging onto its acquiring firm like an ugly barnacle, was expunged.
The Price That Makes Hedge Funds a Steal
When Tim Cook announced slowing iPhone sales at Apple last quarter, analysts ascribed the shortfall to saturated demand at a price over $1,000. Debate turned to how much demand would increase at a lower price and whether higher volumes would offset lower prices and create revenue growth. None of the analysts even considered whether the iPhone had lost its value as a product. Long-short equity hedge funds, by contrast, are deeply out of favor.
Why Your Superstar Manager May Be Toxic
Recently, my boss T.J. Carlson was named Chief Investment Officer of the Year by Institutional Investor, an award voted on by other allocators. (There’s a point to this, other than blatant brown-nosing. Okay, so maybe a little brown-nosing, but stay with me.) His thank-you speech was short and sweet, not surprisingly. T.J.’s not one for verbose pontificating, but what he does have to say is always worth listening to. And also not surprisingly, the first thing he mentioned was his team.
Want to Divorce Your Private Equity Manager? Good Luck.
Most young couples planning their wedding don’t think about the possibility of divorce. When blinded by love, negotiating a prenuptial agreement isn’t top of mind — perhaps rightfully so if “till death do us part” is to have any real meaning. Unfortunately, a bleaker reality often intrudes; roughly 45 percent of marriages in the U.S. end in divorce, according to often-cited statistics.
How the Winklevoss Twins Are Trying to Tame Bitcoin
It took a scandal for Facebook's Mark Zuckerberg to concede a need for regulation. Some cryptocurrency entrepreneurs got to that point more quickly and voluntarily. Mark Zuckerberg started Facebook in 2004.
Your Brain Wants You To Make Bad Decisions. Here’s How To Avoid Them.
The human brain is hard-wired to confirm biases, overweight the importance of recent information, and run with the herd. But a new book shows how to get around our flawed programming. In last month’s column, I implied that the Yankees will win the World Series this year by maximizing their home field advantage. Acquiring power-hitter Giancarlo Stanton, whose hitting patterns are custom-made to thrive in Yankee Stadium, will lift the talented, young team over the top, I predicted.
Why the Hysteria Over Active Management is Misguided
I always suspected my musical tastes were a bit eclectic, but I never realized they could be empirically bad. Clearly I have a small degree of permanent hearing loss in both ears, mostly likely from blasting Def Leppard's “Pour Some Sugar On Me” in my best friend’s Ford Mustang throughout 1988, but surely that couldn’t have rendered me utterly tone deaf in later life, right? Wrong.
The Dangers of Short-Selling Disclosure
During the bull market’s past nine years, short-selling has been a torturous endeavor, perhaps even a career killer. And now, to make matters worse, there’s a new effort to force short-sellers to disclose their positions. A short-seller disclosure act is being promoted by the exchanges and by the target of the most transparent short bet in recent memory: Herbalife, the multilevel marketing company.
I’ll Finally Know Everyone Who Reads This Column. That Scares Me.
It’s over. The digital revolution has finally claimed victory over a print magazine I love and have loved for a long time — specifically, the one you are now reading. After 50 years, the print version of Institutional Investor is being retired. Sigh. I’d love to pretend this doesn’t upset me, but it does. I’ve read this magazine since college, and it’s been an honor to be featured in its pages. I will miss it and the era it captured.
When Finance Turns Parasitic
At its best, finance is productive — but all too often, excess intermediation results in the transfer of risk to those least able to understand it. Here’s what to do about it. Andrew Haldane, the chief economist of the Bank of England, once stated finance has the “ability to both invigorate and incapacitate large parts of the nonfinancial economy.” In theory, finance represents a simple function.
The Hidden Tax on Private Equity Investors
Private equity firms now extracting their extra pound of flesh while the going is good will face serious scrutiny down the road. As a fresh-faced businesss school graduate 18 years ago, I joined a boutique private equity firm. The firm raised its third fund, and the principals committed a sizable investment alongside a respected list of limited partners.
Corner Office | Institutional Investor
The bank’s Scottish Widows and Wealth divisions said it will pull the mandate from the recently merged asset manager over concerns the assets are now being managed by a competitor.
The Illusion of Alignment in Investing
It’s really hard to design incentive programs that tie individuals’ actions to organizational success. Take it from me just how hard it is: I’m a guy who just rewarded his children with a dog, literally, for getting 500 stars on their behavior chart. This dog — formally named Megadog by my five-year-old daughter — was the maximum bonus possible in a kid-compensation scheme gone awry.
Do More to Expose the Sins of Asset Management
I had one thought after reading Mohamed A. El-Erian’s recent Bloomberg column about Bitcoin: He had phoned it in.
Culture | Institutional Investor
Sponsored By:<br> Joseph C. Flaherty, Jr., Chief Investment Risk Officer<br> Ryan E. Mullen, CIMA, ARPC, Senior Managing Director, Head of Defined Contribution Investments<br> Derek W. Beane, CFA, Director, Investment Products<br>
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