A Big Thank You To The S&P 500 Futures
Good day traders.
First off, a big thank you to the S&P 500 futures, we could not have done it without you!
Every trader/investor, as well as money managers, lives and dies by comparing their performance to the benchmarks. Whether it be the S&P’s or MSCI that is how clients perceive the value of a manager. How you outperform the benchmarks can remain elusive.
We are of the belief that having broad exposure to the market via a ‘model portfolio’ of low cost, best in class ETF’s combined with tactical and opportunistic trades is one way to put yourself in a position to outperform the benchmarks.
Some research from AQR Capital Management suggests that active managers can and do outperform passive management:
“…our studies show that the long-run evidence on collective active manager performance from several databases appears surprisingly good. Positive average alphas for delegated active managers may reflect true outperformance over 20 years.”
Naturally one of the other arguments that comes up is that with the growing percentage of ‘passive’ managers, active managers are doomed to be marginalized. We would take issue with that conclusion.
At present, it is estimated that roughly 38% of money being managed is passive via delegated or external management (AQR). However, that leaves out retail and institutional investors, so the number may be much higher. At what point does passive investing collapse on itself? 70%? 80% It’s not possible to know. However, this simple logic provides comfort to those in the active space: if passive investment continues to largely by the same stocks that stretch valuations and create liquidity issues, active investors will be able to capitalize on the anomalies and price discovery situations in the REST of the marketplace that is untouched by the flood of agnostic capital inflows.
Lastly, the market environment plays a very key role in terms of returns. Studies show that active managers tend to outperform the benchmarks during recessionary phases as well as periods punctuated by high dispersion between stock-specific returns that combine with an overall weak market. Aspen has outperformed the benchmarks without those conditions being present. Provide us some volatility, price discovery, momentum and we could not be happier.
A big thank you to the S&P 500 futures
One of the reasons we suggest clients leave a percentage of their portfolio (20%, 30% or 40%) set aside for Alpha Trades is due to trading opportunities that arise throughout the year. They might be found in a stock or ETF that suggests a valuation play, a tactical trade in a broad asset class or an options trade that takes advantage of near-term technical price action. For August, the S&P 500 futures were our vehicle for trading gains.
We took a total of 5 trades and netted 87 points. This provided us with a very nice boost to overall performance. However, even the Model Portfolio on its own continued to keep pace with the MSCI.
Have a question for me? Just ask.