tag:blogger.com,1999:blog-34323687.post3106071312267914811..comments2024-03-28T12:22:11.704+00:00Comments on Macro Man: Beta investing in EMMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-34323687.post-37963919842670532062007-04-24T15:35:00.000+01:002007-04-24T15:35:00.000+01:00CV, I tend to take the rumours coming out of China...CV, I tend to take the rumours coming out of China at face value- namely, that they will be investing in equities over time. <BR/><BR/>Let's face it- if they weren;t going to, what would be the point of taking the reserves away from SAFE? In this regard, I suspect they will allocate a higher weight towards EM/regional equities than would be implied by MSCI World weightings- certainly GIC in Singapore has done so.<BR/><BR/>Norway is perhaps instructive (though obviously much further down the development curve)- they've recently announced an intention to raise the equity weight in the $300 billion petroleum fund from 40% to 60%.<BR/><BR/>(As an aside, if China decides to centralize its [currently nonexistent] pension assets into one fund....holy cow, will it be big.)Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-782496788807876582007-04-24T10:52:00.000+01:002007-04-24T10:52:00.000+01:00Interesting post Macro Man ... On the Japanese wea...Interesting post Macro Man ... <BR/><BR/>On the Japanese wealth fund. I completely agree that this is in part a result of the Japanese demographic fundamentals. All those assets are going for yield now. <BR/><BR/>In terms of the dollar implications. I hardly think anyone can argue that you are right but what about official policies on the markup of the portfolio? I mean how much are we going to see these funds (e.g. from official governmental institutions) go into assets such as equity (for example) if it is not only on the margins?<BR/><BR/>This I guess is the same issue with China is not although of course they are pegging.CVhttps://www.blogger.com/profile/16843402165210120665noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-42842942225309830662007-04-23T21:15:00.000+01:002007-04-23T21:15:00.000+01:00Ref EMEA currency basket ...can I kindly ask what ...Ref EMEA currency basket ...can I kindly ask what was the composition ??? cheers ..Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-32864015044517257492007-04-23T16:18:00.000+01:002007-04-23T16:18:00.000+01:00Very good point, Brad. This analysis completely i...Very good point, Brad. This analysis completely ignores external debt. Yet, as you say, there has traditionally been a high degree of correlation among various EM assets.<BR/><BR/>If anything, the bulk of underperformance of my naive strategy versus the broader index appears to have been in the mid 90's...which may be explained by the relative performance of Bradys versus local currency debta and equities. Still, a 0.69 return correlation ain't bad for something that didn't take that long to come up with!Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65488285100303390012007-04-23T16:04:00.000+01:002007-04-23T16:04:00.000+01:00For much of the 90s and til say 2005, a lot of EM ...For much of the 90s and til say 2005, a lot of EM hedge funds were making bets on the credit spread of EM $ bonds (getting argentina right -- by getting out in 00 -- and getting brazil right -- by getting in in 02/03 -- drove a lot of returns). So on the fixed income side, it hasn't been all about carry and currency risk. The correlation between currency risk and credit risk for most EM sovereigns has been pretty high (something that all the folks who now short the $ debt via the CDS market to provide a cheap proxy "hedge" for their local currency exposure now exploit), which means that the carry bit may be picking up a fair amount of the credit spread compression/ widening.<BR/><BR/>nonetheless, until fairly recently, most fixed income exposure was, i think, through dollar and euro debt. this has changed big time, but it is a fairly recent shift.<BR/><BR/>brad setserAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-22706687239284635302007-04-23T14:58:00.000+01:002007-04-23T14:58:00.000+01:00In simplistic terms, the term beta refers to that ...In simplistic terms, the term beta refers to that portion of a fund manager's returns that reflect the performance of the broad market (whatever market a particular fud manager may invest in), while alpha refers to that portion of a manager's returns that are down to the manager's skill in security selection.<BR/><BR/>On an individual stock or security basis, beta refers to that portion of the stock's return that can be attributed to overall market peformance, and that portion that represents the merits or demerits of the company. <BR/><BR/>The point of my exercise (and indeed of the All About Alpha post) is that a lot of what purports to be manager skill can actually be identified as participation in broad market performance.<BR/><BR/>Or, looking at it another way, one can get exposure to an asset class via a simple replication strategy that will capture the majority of the asset class's returns without incurring heavy fees.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-77589349560585192562007-04-23T14:28:00.000+01:002007-04-23T14:28:00.000+01:00MM ,I am a novice learning from this blog. Could y...MM ,<BR/><BR/>I am a novice learning from this blog. Could you pls advise on the terminologies "alpha" and "beta" mean w.r.to your post.<BR/><BR/>Any weblink which explains the same would do fine as well. <BR/><BR/>When searched on web, i got confusing results :-(<BR/><BR/>CheersAnonymousnoreply@blogger.com