Rolf Agather is Managing Director of Global Index Research and Innovation for Russell Investments. In this email interview with SmartBrief, Mr. Agather provides context for the new crop of “smart beta” indexes and how they may be useful to investors.
Question: What is “smart beta” and what are some of the advantages to these indexes?
Answer: “Smart beta” is an often used but, in my opinion, not widely understood term. Smart beta refers to an emerging set of indexes that move beyond broad market exposure. These indexes use new methodologies to deliver more specific, specialized or “smart” market exposure to the end user. In the context of index development, smart beta refers to a transparent, rules-based methodology designed to provide specific exposure to market segments or factors. For years market indexes were provided to offer very broad, market capitalization-weighted exposure to asset classes. Smart beta is generally differentiated from more traditional indexes by breaking the link to market price (and resulting company size). (read more…)
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Buffett’s special investing sauce revealed: This paper from Yale University dissects the winning investment strategy that transformed regular ol’ Warren Buffett into the Oracle of Omaha. The paper is fascinating in that it reveals a strategy that isn’t really all that complex. Buffett has utilized leverage of around 1.6-to-1 to purchase undervalued stocks that he then holds through market volatility. The “secret” comes in choosing the right stocks to buy and when. But when you consider Berkshire Hathaway’s portfolio, it’s not like Buffett picks firms unknown to everyone else in the market.
Gensler walks out the saloon doors: Tuesday’s CFTC vote on the Volcker rule reminds me of some old Western movie. Chairman Gary Gensler appears happy to cast one last dramatic vote before exiting through the swinging saloon double-doors.
As the clock ticks down on his time as chairman of the Commodity Futures Trading Commission, Gary Gensler took time Tuesday to highlight some of the achievements at the CFTC during his time at the helm. Speaking at CME Group’s annual Global Financial Leadership Conference, Gensler shared details on how the CFTC’s efforts in implementing the Dodd-Frank Act have helped increase transparency in the swaps market.
Gensler tipped his hat to the futures market, saying President Obama, Congress and regulators often looked at it as a template when conceptualizing and writing rules for other markets. “For decades, the futures market has worked well,” Gensler said. “Even through the crisis of 2008, it stood the test of time.”
Gensler said the CFTC will soon start publishing aggregate data coming from three swaps data repositories every Wednesday. Whether that data will become market-moving information remains to be seen.
“The public can see the price and volume of each swap transaction as it occurs. (read more…)
A collection of stories from SmartBrief publications and the world of finance…
Lots of great insight from the speakers and panelists at the SIFMA Annual Meeting this past week in NYC:
Jeb is running in 2016, right?: Aside from some opening jabs at financial regulatory reform aimed at pleasing the Wall Street audience, Jeb Bush’s speech had all the trappings of a stump speech. Endless money and a jump start on Florida and Texas in the Electoral College would make Bush III an incredibly strong candidate. They say being an ex-president gains you admittance to the most exclusive club in the world. Obviously there are four such individuals in that club right now. If Jeb decides not to run, he’d join an even more exclusive club: Individuals who turned down the chance to embark on a seemingly easy path to the White House. Right now, that club has a membership of one: Colin Powell. (read more…)
Bluford (Blu) Putnam has served as Managing Director and Chief Economist of CME Group since May 2011. Ahead of the Global Financial Leadership Conference, which takes place Nov. 18-20, Mr. Putnam shares his insight about the global economy and the Federal Reserve’s quantitative easing program. He also offers a forecast for global commodities in 2014.
1. What does the forecast look like for the U.S. economy?
The U.S. is 2% real GDP economy, trying to grow a little faster, yet hindered by the government. Even so, the U.S. economy appears to have survived the government shutdown and debt ceiling debate, although concerns over these same issues could arise again early in 2014 as fiscal policy remains mired in partisan politics and brinksmanship. On the monetary policy side, the Federal Reserve seems likely to move to taper its asset purchase programs sooner rather than later. At the same time that quantitative easing is curtailed, the Fed is likely to assure markets that a near-zero target federal funds rate is here to stay for an extended period of time. (read more…)