Ajay Argal
Birla Sun Life AMC Ltd. by Diana Cawfield 10 Nov 06
Manager says growth in India is here for the long run.
Ajay Argal, co-manager of the $177.9-million Excel India, believes that the India growth story is a sustainable one.
"India is no longer a market for short-term players," says Argal, a senior portfolio manager with Birla Sun Life AMC Ltd. in Mumbai, India. "There is broad-based growth happening and the opportunities are spread out in many, many sectors."
Argal sees three broad trends driving the growth story: capital investment, consumption and outsourcing. He says capital investment will be spurred as industries reach their capacity constraints.
Argal is seeing a lot of industries, such as oil refining, cement and steel, that are operating at capacity levels he has not seen in the last 10 or 15 years. He says the manufacturing sector has been growing at 8% to 10% over the last three years.
Friday, November 10, 2006
Thursday, November 9, 2006
National Post on Mutual Fund Fees
10. Mutual funds feel the squeeze: Caught in middle between ETFs, hedge funds
Jonathan Chevreau
9 November 2006
National Post
FP8
Canada's high-priced mutual funds are being attacked from two directions -- by even higher-priced actively managed "hedge" funds and by low-priced exchange-traded funds, or ETFs.
At the World Hedge Fund Summit -- which concluded yesterday in Toronto -- a popular view was that ETFs and hedge funds nicely complement each other.
In effect, speakers argued, mutual funds are 90% closet index funds -- a fact Morningstar Canada confirmed last year when it scrutinized some of the most popular Canadian equity mutual funds.
What's wrong with that, you ask, given the growing popularity of passive indexing strategies? The problem is the 90% of the "beta" or market effect can be purchased more cheaply through real index funds or ETFs. Mutual funds may charge an annual fee of 2.5% that applies both on the "passive" part of the portfolio as well as the 10% where managers actually deliver "alpha" through their stock-picking "prowess."
Holt Capital Advisers' Christopher Holt argues such investors might be better served by separating the alpha and beta components of active management. Thus 90% of an investor's money could go in an ETF, with the rest going to a suitable hedge fund. Their "2 and 20" fee structure works out more cheaply since it applies only to 10% of the total portfolio. That's why hedgies think their high fees are relative bargains.
The best talk was by Dr. Randy Cohen of the Harvard Business School. That's the same place Peter Tufano toils. Tufano is one of three co-authors of the infamous global study showing how Canada's mutual fund MERs are higher than 18 other nations.
Asked about his colleague's study, Cohen said he finds Canadian MERs "amazingly high. In the U.S. I grew up with funds charging 100 basis points (1%). I found it amazing the rest of the world is much higher and that Canada's are even higher than western Europe's."
Nor have fees fallen with economies of scale, he said. He concludes high-priced funds appeal to "naive investors who are not fee sensitive and listen to their brokers ... It's an unfortunate situation, especially up here. People should look to alternatives where the fees will be lower."
Cohen reviewed the well-known literature familiar to most indexers; that in aggregate active management does not make back its own fees. However, Cohen says the highly intelligent, motivated and well-compensated managers of both mutual funds and hedge funds can beat the market and pick stocks. The problem is they may only have four or five "best ideas."
As their funds get large and popular they end rounding out their holdings with "filler," which amounts to closet indexing.
Cohen finds active managers do beat the market by 130 basis points but those gains are given back in trading fees, their own fees and from the drag of holding cash. Even average managers are good stock pickers but "Wall Street is sucking out all the money."
The solution is to eschew broad diversification and concentrate portfolios only in their best ideas.
If an investor owned 20 such funds each with just six good picks, they'd have a well diversified portfolio that might well beat the indexes.
So why don't they? Here, Cohen sounds like David Swensen in his book Unconventional Success.
"Mutual funds are asset gathering businesses." Success breeds mediocrity since no billion-dollar fund can hold just six names: any trading activity would move the market in those stocks.
Cohen's research shows smaller funds do better than larger funds and concentrated smaller funds do better still.
These smaller concentrated funds sound more like hedge funds, which have more flexibility to concentrate portfolios, use leverage or go short certain stocks or sectors.
But the most popular segment of the hedge fund industry are so-called "funds of funds" that are also in the asset gathering business.
These add extra layers of fees and end up being so diversified they look like just another broadly based mutual fund.
The results are typically little better than the yield of the average bond.
I was on a panel on the retailization of hedge funds, though as I noted in my blog, felt like the proverbial skunk at a picnic. My view is that with more than US$1.3-trillion invested in this asset class worldwide, a reversion to the mean is almost inevitable.
Mutual funds have largely failed to make the little guy rich and I fail to see why hedge funds will do any better as a mass retail product. That doesn't mean there may not be a place for them in pension funds or for single-manager funds for rich people who want to fill holes in their portfolios: perhaps long/short equity funds that do something neither ETFs nor mutual funds can give them.
Indeed, several American speakers confirmed the mass of money coming at them is making the game more difficult. There is a wider variance between the top managers and the bottom ones, said Maxam Capital's Sandra Manske.
Guess which will end up in Joe Average's high-priced fund of funds portfolio?
There was no shortage of charts showing allegedly superior returns for the hedgies but the survivorship bias that plagues mutual funds also affects hedge fund data.
See Swensen on this topic, where he reports that the collapse of Long Term Capital Management did not end up reported in hedge fund performance data bases.
We'll look further at this in Monday's Advisor Post.
Jonathan Chevreau
9 November 2006
National Post
FP8
Canada's high-priced mutual funds are being attacked from two directions -- by even higher-priced actively managed "hedge" funds and by low-priced exchange-traded funds, or ETFs.
At the World Hedge Fund Summit -- which concluded yesterday in Toronto -- a popular view was that ETFs and hedge funds nicely complement each other.
In effect, speakers argued, mutual funds are 90% closet index funds -- a fact Morningstar Canada confirmed last year when it scrutinized some of the most popular Canadian equity mutual funds.
What's wrong with that, you ask, given the growing popularity of passive indexing strategies? The problem is the 90% of the "beta" or market effect can be purchased more cheaply through real index funds or ETFs. Mutual funds may charge an annual fee of 2.5% that applies both on the "passive" part of the portfolio as well as the 10% where managers actually deliver "alpha" through their stock-picking "prowess."
Holt Capital Advisers' Christopher Holt argues such investors might be better served by separating the alpha and beta components of active management. Thus 90% of an investor's money could go in an ETF, with the rest going to a suitable hedge fund. Their "2 and 20" fee structure works out more cheaply since it applies only to 10% of the total portfolio. That's why hedgies think their high fees are relative bargains.
The best talk was by Dr. Randy Cohen of the Harvard Business School. That's the same place Peter Tufano toils. Tufano is one of three co-authors of the infamous global study showing how Canada's mutual fund MERs are higher than 18 other nations.
Asked about his colleague's study, Cohen said he finds Canadian MERs "amazingly high. In the U.S. I grew up with funds charging 100 basis points (1%). I found it amazing the rest of the world is much higher and that Canada's are even higher than western Europe's."
Nor have fees fallen with economies of scale, he said. He concludes high-priced funds appeal to "naive investors who are not fee sensitive and listen to their brokers ... It's an unfortunate situation, especially up here. People should look to alternatives where the fees will be lower."
Cohen reviewed the well-known literature familiar to most indexers; that in aggregate active management does not make back its own fees. However, Cohen says the highly intelligent, motivated and well-compensated managers of both mutual funds and hedge funds can beat the market and pick stocks. The problem is they may only have four or five "best ideas."
As their funds get large and popular they end rounding out their holdings with "filler," which amounts to closet indexing.
Cohen finds active managers do beat the market by 130 basis points but those gains are given back in trading fees, their own fees and from the drag of holding cash. Even average managers are good stock pickers but "Wall Street is sucking out all the money."
The solution is to eschew broad diversification and concentrate portfolios only in their best ideas.
If an investor owned 20 such funds each with just six good picks, they'd have a well diversified portfolio that might well beat the indexes.
So why don't they? Here, Cohen sounds like David Swensen in his book Unconventional Success.
"Mutual funds are asset gathering businesses." Success breeds mediocrity since no billion-dollar fund can hold just six names: any trading activity would move the market in those stocks.
Cohen's research shows smaller funds do better than larger funds and concentrated smaller funds do better still.
These smaller concentrated funds sound more like hedge funds, which have more flexibility to concentrate portfolios, use leverage or go short certain stocks or sectors.
But the most popular segment of the hedge fund industry are so-called "funds of funds" that are also in the asset gathering business.
These add extra layers of fees and end up being so diversified they look like just another broadly based mutual fund.
The results are typically little better than the yield of the average bond.
I was on a panel on the retailization of hedge funds, though as I noted in my blog, felt like the proverbial skunk at a picnic. My view is that with more than US$1.3-trillion invested in this asset class worldwide, a reversion to the mean is almost inevitable.
Mutual funds have largely failed to make the little guy rich and I fail to see why hedge funds will do any better as a mass retail product. That doesn't mean there may not be a place for them in pension funds or for single-manager funds for rich people who want to fill holes in their portfolios: perhaps long/short equity funds that do something neither ETFs nor mutual funds can give them.
Indeed, several American speakers confirmed the mass of money coming at them is making the game more difficult. There is a wider variance between the top managers and the bottom ones, said Maxam Capital's Sandra Manske.
Guess which will end up in Joe Average's high-priced fund of funds portfolio?
There was no shortage of charts showing allegedly superior returns for the hedgies but the survivorship bias that plagues mutual funds also affects hedge fund data.
See Swensen on this topic, where he reports that the collapse of Long Term Capital Management did not end up reported in hedge fund performance data bases.
We'll look further at this in Monday's Advisor Post.
Wednesday, November 8, 2006
Google vs Sandisk
My Google calls are not taking quite the direction I expected. The stock hit $481 & change today, yet the calls are down $0.15 from where I picked them up (the stock was trading @ around $477 at the time I think?), and that was less than a week ago.
Sandisk is looking like a better play, especially after reading a recent article from Asif Suria (http://ce.seekingalpha.com/article/19748).
On a positive note though, Encana has been on a decent uptick. Its up between 5-7% from my various purchase prices over the past week.
Sandisk is looking like a better play, especially after reading a recent article from Asif Suria (http://ce.seekingalpha.com/article/19748).
On a positive note though, Encana has been on a decent uptick. Its up between 5-7% from my various purchase prices over the past week.
Monday, November 6, 2006
What it takes to be a leader...
Here's the National Post's take on business leadership...
"Mitch Moxley
4 November 2006
National Post
There is a shifting dynamic at the top. Many of our business leaders are reaching retirement age, creating a demand for fresh executives. This is opening the door to a new set of business leaders -- many of today's rising Canadian executives are young, many are women and many come from the West.
Take Sean Durfy, for example. He is WestJet Airlines Ltd's. recently appointed president. He just turned 40. Research in Motion Ltd.'s wunderkind Dennis Kavelman is still in his mid-30s. And Kathleen Sendall, senior vice-president at Petro-Canada, is a rising star in the oil patch and the first woman to chair the Canadian Association of Petroleum Producers.
They may be new faces but they are commanding attention. Today, the leaders of top companies must be more than business-savvy. They must be inspirational, says Don Nolan, president of Nolan Associates, an executive recruitment firm in Toronto. "People want to join companies managed by great leaders," Mr. Nolan says. "The best leaders are those who are empowered by their followers." "...
Here's my take on characteristics of a good leader (at least the type of leader I aspire to be):
Motivated, inspirational, decisive, charismatic, good communicator / public speaker
"Mitch Moxley
4 November 2006
National Post
There is a shifting dynamic at the top. Many of our business leaders are reaching retirement age, creating a demand for fresh executives. This is opening the door to a new set of business leaders -- many of today's rising Canadian executives are young, many are women and many come from the West.
Take Sean Durfy, for example. He is WestJet Airlines Ltd's. recently appointed president. He just turned 40. Research in Motion Ltd.'s wunderkind Dennis Kavelman is still in his mid-30s. And Kathleen Sendall, senior vice-president at Petro-Canada, is a rising star in the oil patch and the first woman to chair the Canadian Association of Petroleum Producers.
They may be new faces but they are commanding attention. Today, the leaders of top companies must be more than business-savvy. They must be inspirational, says Don Nolan, president of Nolan Associates, an executive recruitment firm in Toronto. "People want to join companies managed by great leaders," Mr. Nolan says. "The best leaders are those who are empowered by their followers." "...
Here's my take on characteristics of a good leader (at least the type of leader I aspire to be):
Motivated, inspirational, decisive, charismatic, good communicator / public speaker
Sunday, November 5, 2006
Google overvalued?
Bought GOP Dec 550 C on Friday after GOOG had been down for 3 days running. Then saw the following article today:
"ReutersBig money picks GE, sees Google as pricey: Barron'sSunday November 5, 2:38 pm ET
NEW YORK (Reuters) - Diversified manufacturer General Electric Co. (NYSE:GE - News) is a favorite pick of major money managers, some of whom see the shares rising as much as 30 percent in the coming months, Barron's said in its November 6 edition.
Such investors are cheered by expectations of tame U.S. inflation, low interest rates and modest stock valuations, the financial weekly said.
Web search leader Google Inc. (NASDAQ:GOOG - News) and automaker General Motors Corp.(NYSE:GM - News) were named as the market's most overvalued shares in Barron's Big Money poll of major money managers. "
It'll be interesting to see what happens with GOOG in the coming week. I'll be happy making 30%+. Then I need to find the next dead stock and ride it while it comes back to life.
"ReutersBig money picks GE, sees Google as pricey: Barron'sSunday November 5, 2:38 pm ET
NEW YORK (Reuters) - Diversified manufacturer General Electric Co. (NYSE:GE - News) is a favorite pick of major money managers, some of whom see the shares rising as much as 30 percent in the coming months, Barron's said in its November 6 edition.
Such investors are cheered by expectations of tame U.S. inflation, low interest rates and modest stock valuations, the financial weekly said.
Web search leader Google Inc. (NASDAQ:GOOG - News) and automaker General Motors Corp.(NYSE:GM - News) were named as the market's most overvalued shares in Barron's Big Money poll of major money managers. "
It'll be interesting to see what happens with GOOG in the coming week. I'll be happy making 30%+. Then I need to find the next dead stock and ride it while it comes back to life.
Thursday, August 24, 2006
The End of an Era
My grandmother died today... I lived for years with her. In some ways I feel closer to her than to my mom... Cancer.
I never got a chance to say bye... To have her meet my son... To have one last talk. We used to have such great talks...
Wednesday, August 9, 2006
From Blue to Green
Oh man! So much has happened since my last post (when was that anyhow? Oh. right. June 19th, when I posted Unc. Bill's best ever birthday message). So what's happened since then? Well, for starters, I've left the blue bank to go to the green bank (still wealth mgmt). I'm no longer an "online" guy, I'm now more general business, and I no longer work in a marketing group, I'm now in finance??? (How did that last bit happen). On top of that, I missed out on Oubay's stock tip (my own fault) and failed to buy ATI (either the stock or the calls). And then I turned around and sold my RIMM calls too early, missing a $7.00 run up in the stock price. Yeesh. You've got to check out this guy on Youtube. I hope I'm as in touch with what's going on around me as he is when I get to his age.
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