Category: Newsletter

Fed’s QE3 Expected to Total Nearly $1T – Marquette Associates Study

Institutional Fixed Income Managers Share QE3 Endgame Expectations

On September 14, the Federal Reserve announced that it would begin another round of quantitative easing by purchasing $40 billion dollars of mortgaged backed securities (MBS) a month. The plan, referred to as QE3 by analysts, is intended to boost a U.S. economy suffering from high unemployment. Investors have closely followed the Fed’s Quantitative Easing (“QE”) programs due to the unconventional monetary policies’ effects on broader asset markets, as well as the possibility that Fed actions may stoke inflation down the line. Given the open-ended nature of QE3, market expectations of the size, duration, and effectiveness of the plan may be both especially relevant and diverse.

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The Fiscal Cliff

Late October 2012 Investment Perspectives

Ramifications for the Economy, Financial Markets, and Institutional Portfolios

With the Presidential election quickly approaching on November 6th there has been a lot of talk about the upcoming “fiscal cliff” that awaits the eventual winner. Due to the lack of bipartisan consensus in Washington over the last few years there are a host of tax increases and spending cuts set to hit the economy if no action is taken by policy makers.

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Emerging Market Small-Cap Stocks: What’s the Story?

June 2012 Investment Perspectives

By now, most investors are familiar with emerging market stocks and their benefits to overall portfolio performance. Favorable demographics, urbanization, escalating levels of wealth, and rising consumer spending are all long-term secular trends that have emerged as compelling reasons to include emerging markets in institutional portfolios.

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Update on Europe

March 2012 Investment Perspectives

As the threat of sovereign defaults and subsequent contagion in the eurozone persists, international leaders have continued to work towards a long-term solution for the fiscal issues threatening Greece and the rest of the eurozone.

This newsletter summarizes the latest efforts to rectify the European debt crisis as well as significant events that have transpired since our last European Update. Much emphasis is given to Greece and its latest bailout package, since the recently approved assistance will likely have a large impact on both investors and the future of the eurozone.

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Hedged Equity: What Happened to the Alpha?

Late January 2012 Investment Perspectives

Coming out of a phenomenal period of relative performance during the tech boom and bust, hedged equity performance declined relative to the S&P 500 during the mid 2000’s.

However, absolute returns were still strong in risk adjusted terms, and hedged equity offered significant downside protection in 2008. While hedged equity trailed as the stock market rebounded in 2009, returns were high and trailing three-year performance strong. Lately though, even as hedged equity hedge funds have continued to offer risk reduction in terms of lower volatility, weak hedge fund performance has prompted increasing investor concern.

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2012 Market Preview

January 2012 Investment Perspectives

Reflecting back on 2011 does not elicit a lot of warm and fuzzy feelings.

News highlights include a downgrade to the U.S. credit rating, political gridlock in Washington D.C., ongoing sovereign debt issues in Europe, and a stubborn lack of economic growth. Predictably, these major news items took a toll on the capital markets, with U.S. equities mostly down for the year, and non-U.S. equities considerably worse off than their U.S. counterparts. Not surprisingly, the ongoing frustration (and dispersion) of equity markets pushed investors to the bond market, as rates – contrary to popular sentiment one year ago – fell yet again, thus making the year a profitable one for fixed income investors. Moving outside of the traditional capital markets, alternative asset classes had more of a mixed 2011: hedge funds again disappointed, while real estate and private equity continued their recoveries from the abyss known as 2008 – 2009.

But enough about 2011 – it is 2012 and investors are less concerned about what happened, and more interested in what the coming year holds for their portfolios. In the following articles, we will take a closer look at critical issues for each asset class in 2012. Each article contains insightful analysis and key themes to monitor over the coming year, themes which will underlie the actual performance of the asset classes covered. Articles are offered for the following asset classes: fixed income, U.S. equities, non-U.S. equities, hedge funds, real estate, private equity, and infrastructure. As a backdrop to the capital markets, we examine some crucial macroeconomic topics as they pertain to the U.S. economy.

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Update on European Markets

November 2011 Investment Perspectives

In light of the seemingly non-stop news about the debt of Greece and its fellow PIIGS1 countries, the following article summarizes the latest efforts to rectify the sovereign debt issues which have roiled markets across the world. In particular, new programs and commitments from assorted European institutions are summarized, along with the market ramifications – opportunities and risks – of the ongoing debt challenges in Europe.

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The Current Commercial Real Estate Picture

September 2011 Investment Perspectives

The NCREIF Property Index’s (“NPI”) second-quarter return of 3.94% was the sixth straight quarter of positive performance and the second strongest quarter of performance since the downturn beginning in September of 2007. While property income level has slowly risen, fluctuating in the 1.25% to 1.70% range per quarter, appreciation of property values has been the primary catalyst of real estate’s positive return. Spurring the underlying property value appreciation is the transaction volume increase, up 132% year-over-year, coupled with cap rate compression.
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Given the upward trajectory of real estate values, investors have started to wonder if the recovery has gotten ahead of itself, and which segments of the market offer the best opportunities for future returns. In the following, we assess the current recovery as well as future opportunities.

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Impact of Rent Levels on Inflation

August 2011 Investment Perspectives

The collapse of the housing market coupled with the massive wave of foreclosures has created an increased demand for rental properties as former homeowners are forced to find new places to live. Given the finite supply of rental properties, some have speculated that the greater demand for rental properties will drive rents higher, thus contributing to elevated inflation (as measured by the Consumer Price Index).

The following article investigates how changes in rents influence inflation figures, most especially in light of the housing market collapse.

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