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The Idea Farm Weekly - Cultivating New Investment Ideas
 

Mebane Faber
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In this issue we include research from HSBC Global Research.  They have a 50 page paper on the 10 Key Trends Changing Investment Management.    A few highlights below:

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The search for yield. With risk-free rates so low, investors are desperate for income. They have already piled into bonds. Credit remains in a sweet spot, though issuers are attracted by the low interest rates but, for investors, spreads over government bonds remain decent. We think dividend yield stocks remain attractive, too.  Many investors argue it’s too late to buy them but in the US,  in particular, income funds still comprise only 3% of equity mutual funds.

Risk minimising strategies. Investors ideally would like equity-style returns with bond-like volatility. That’s rarely possible. But fund managers are developing products that offer different combinations of risk and return. Such strategies include: multi-asset funds, long/short equity strategies, risk parity products, minimum volatility equity funds and using options to target a level of risk.


The growth of multi-asset. The fastest growing type of risk minimising strategy, especially in the UK, is the absolute return fund, most famously Standard Life’s GARS. Such funds target Libor-plus absolute returns, with bond-like volatility and costs lower than hedge funds. They have their detractors (do they really create alpha, or are they just leveraged bond funds?) but look likely to grow further, even in the US where they have yet to take off.
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Here is the 50 page PDF:

10 Key Trends Changing Investment Management


For more information:

Garry Evans

Global Head of Equity Strategy

The Hongkong and Shanghai Banking Corporation Limited

+852 2996 6916

garryevans@hsbc.com.hk

Garry heads HSBC's equity strategy team worldwide. His previous roles at HSBC include Asia Pacific Equity Strategist, Head of Pan-Asian Equity Research, and Japan Strategist. Garry began his career as a financial journalist.


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