- The great majority of institutional investors are plagued with a short-term, relative-performance orientation and lack the long-term perspective that retirement and endowment funds deserve.
- [Taking about institutional investors] Hundreds of billions of other people’s hard-earned dollars are routinely whipped from investment to investment based on little or no in-deph research or analysis.
- You probably would not choose to dine at a restaurant whose chef always ate elsewhere. You should be no more satisfied with a money manager who does not eat his or her own cooking.
- Selling is difficult for money managers for three additional reasons:
- 1) Many investments are illiquid, and disposing of institutional-sixed positions depends on more than simply the desire todo so.
- 2) Selling creates additional work as sale proceeds must be reinvested in a subsequent purchase. Retaining current holdings is much easier.
- 3) SEC, the governmental agency with regulatory responsibility for mutual funds, regards portfolio turnover unfavorably. Mutual fund managers thus have yet another reason to avoid selling
- Institutional investors are caught in a vicious circle. The more money they manage, the more they earn. However, there are diseconomies of scale in the returns earned on increasingly large sums of money under management.
- Allocating money into rigid categories simplifies investment decision making but only at the potential cost of lower returns.
- Window dressing is the practice of making a portfolio look good for quarterly reporting purposes.
- As depressed issues drop further in price, attractive opportunities may be created for value investors.
- Unfortunately the appropriate relationship between bond yields and stock prices cannot be incorporated into a computer program. There are simply too many variables to allow investors to determine a relationship today that will apply under every future scenario.
- Value investors believe that stock prices depart from underlying value and that investors can achieve above-market returns by buying undervalued securities.
- Investing without understanding the behavior of institutional investors is like driving in a foreign land without a map.
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Published by Peter Sullivan
info at saetacapital.com
"We all know that Art is not truth. Art is a lie that makes us realize the truth, at least the trith that is given to us to understand." Pablo Picasso.
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