Tuesday, April 24, 2007

van Agtmael: Put 20% of your portfolio in emerging markets

Your neutral benchmark for stocks should include a 20% allocation to emerging market stocks, said Antoine van Agtmael in his April 23 speech on "The Emerging Markets Century" to the Boston Security Analysts Society. Twenty percent is roughly the percentage of global market capitalization accounted for by emerging market stocks.

Van Agtmael, the chairman and chief investment officer of Emerging Markets Management, wouldn't stop at 20%. He recommends raising your allocation by 1% annually. Your benchmark should be dynamic, he said. However, after a series of good years, you should skip a year of raising your allocation. Speaking of good years, emerging markets have enjoyed a strong run recently. Accordingly, van Agtmael would currently recommend underweighting emerging markets in your portfolio.

Consider companies outside the top 200

Van Agtmael recommended that investment professionals consider companies other than only the 1,000 included in the indexes. He noted that 90% of investments in emerging market companies are made into the top 200 stocks. That's a small percentage of the 15,000 stocks listed around the world.

Investment managers should look at what made the current leaders among emerging markets great. They should seek those same characteristics in what's likely to become the next generation of market leaders. For van Agtmael, those characteristics include:
  • Unconventional thinking about how to solve problems
  • A truly global mindset
  • An obsession with quality and execution

America no longer at the center

From a broader perspective, van Agtmael said that Americans need to lose their perception that we're the center of the economic universe. This is less and less true. Moreover, we are now in the midst of the biggest and greatest shift in the global economy and power since the Industrial Revolution. In some sense, it's a return to the world before the Industrial Revolution, when China and India were the world's largest economies, he said.

Van Agtmael's new book

Van Agtmael recently published The Emerging Markets Century: How a New Breed of World-Class Company is Overtaking the World.

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Saturday, April 14, 2007

How your competitors raise AUM -- accessible only until April 30

Interested in learning how your competitors raise assets?

For insights, listen to audio webcasts of the Asset Gathering Conference put on by UBS. To access the audio webcast, go to www.ibb.ubs.com. Find the Conferences icon in the middle right side of the page. Click on icon. Follow link for Webcast next to the Asset Gathering Conference header. The webcast is accessible only until April 30.

Jen Dunning, Client Services and Marketing, Wagonhound Investments, L.P., manager of Pronghorn L.P., a global opportunistic equity hedge fund, told me about this resource. She says "I would recommend listening to the following talks:
  • Alliance/Bernstein-about derisking and rerisking, some interesting new jargon
  • McKinsey-concept of ‘convergence products’-alternatives are not seen as an asset class, rather they are techniques being applied to traditional asset management and will be embedded in traditional products
  • Callan-predictable info, but timely
  • Fidelity-interesting example of why compounding is so critical for ensuring enough $ for retirement"

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Simple explanation of "contango"

Contango is a complicated concept.

That's why I was struck by the following sentence: "The reason is a futures-market phenomenon known as 'contango' -- the industry's way of saying near-term futures are cheaper than those the next month out."

This sentence appeared in "Oil-ETF Investors Are Stung by 'Contango,' " an April 10 Wall Street Journal article by Ian Salisbury.

You can read more definitions of contango.

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Monday, April 09, 2007

How many of your clients will defect...

... if your wealth management firm is sold?

On average only 1.5% of revenue-generating clients defect in wealth management deals, according to Elizabeth Nesvold of Cambridge International Partners, an M&A advisory firm. Nesvold spoke about "Evolution (or Revolution?) of the Wealth Management Industry" to the Boston Security Analysts Society on April 2, 2007.

Nesvold said she could only think of one high net worth deal where client defections were so bad that they triggered a modest decline in a firm's purchase price.

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Wednesday, April 04, 2007

Nice visual perspective from Birinyi Associates blog

Which country's stock markets were winners and which were losers during the first quarter of 2007?

You can grasp the answer within seconds, thanks to this "visual perspective" on Ticker Sense, the Birinyi Associates blog.

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Vanity Fair as a stock market crash predictor

Here's an entertaining stock market article from Wooden Horse, the media directory specializing in magazines. I'm reprinting the article with their permission.

Whenever VANITY FAIR breaks a record for ad pages, the stock market crashes immediately afterward, Brandweek has determined, quoting "a highly scientific study" by "Short Takes."

VF's March 2007 Hollywood edition (which of course hit the streets in February) was "Our Biggest Issue Ever!" With 500 pages. During the week of Feb 26, Dow Jones plummeted to 12,114 from 12,647.

VF's previous largest issue was its April 2001 Hollywood edition, with 430 pages. In the week of March 19, 2001, the Dow tanked from 9,820 to 9,504. (By September it was at 8,235).

Need more proof? The largest VF prior to 2001 was the September 2000 edition, at 396 pages. In the week of Oct. 16, 2000, the Dow plummeted from 10,801 to 10,279.