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The Riddle About Differing Fund Flows And Assets Under Management

By Detlef Glow Click to enlarge Looking at market statistics from different providers such as data vendors, associations, central banks, and others, one realizes that none of the providers state the same number for a fund’s flows or assets under management for a specific date. Even though this may sound a bit odd, it is normal and the nature of the beast. Since all data vendors, associations, and others have a different basis for the data they provide, flow numbers will be different from one provider to another. Data vendors calculate flows based on the funds in their database, while associations use the data on flows and assets under management they receive from their members. These data may include mandates and special-purpose vehicles such as pension funds, which are not mutual funds at all. In contrast, central banks use the holdings data from their associated banks to evaluate the holdings of mutual funds. Statistics calculated for the same topic and for the same market can vary widely, since the underlying data can be totally different. Good examples of the differences in databases for a market segment are the several reports available on the European exchange-traded fund (ETFs) market. While the Thomson Reuters Lipper report focuses only on ETFs, i.e., products that are funds and regulated as such, other reports focus on the whole market of exchange-traded products (ETPs), which means those reports also include structured notes such as exchange-traded commodities (ETCs). Another factor that always leads to differences in numbers is the currency in which the report is calculated, since some providers use euros, while others use the U.S. dollar for the denomination of fund flows and assets under management. But even if two providers of fund flows reports use the same data to calculate the flows for a given region, they may end up with totally different results. The employed methodology for the calculation of the flows might be different and would by definition lead to different results. In addition, all results are dependent on correct and timely data input from the fund promoters, since any inaccurate numbers in the database impact the quality of the statistics. Even though a data vendor might have quality checks in place for the incoming data, it may not find all the corrupted data. Even though quality checks do help to get the numbers right, some data may be missing and have to be estimated with an algorithm. This also explains why flows and assets under management data change over time, since it takes a while for all the fund promoters to deliver correct data. All in all, it can be said that the most recent fund flows and assets under management statistics published shortly after the end of month should be seen more as a guide to evaluate market trends than as a scientific result. Anybody who uses these kinds of statistics should make a decision about which statistics suit their needs best and then stay with those statistics. This does not mean that one should not question whether the displayed data are right, but one should realize that there always will be differences in flows data for any given month. The views expressed are the views of the author, not necessarily those of Thomson Reuters Lipper.

Spinoffs: Outperformance And Investment Strategies

Originally published on March 8, 2016 By Rupert Hargreaves Spinoffs Investment Strategies… Warren Buffett, Benjamin Graham, Seth Klarman and Walter Schloss are probably some of the greatest value investors of all time, and at one point or another, these investment titans have all mentioned spinoffs as a critical area for value investors to seek out bargains. And there’s plenty of cold hard data to back up this conclusion. Indeed, only last week, Goldman Sachs issued a Portfolio Strategy Research note to clients on this very topic using data from the past six months. Spinoffs Investment Strategies – Spinoffs are highly likely to outperform parents Goldman’s research note, titled Investment Strategies For Spinoffs And Carve-Outs looked at the performance of spincos relative to their parent companies and the S&P 500 in the first two years after spinoff. The bank’s research showed that since 1999, spincos have outperformed their parents and the index by a median of 9% and 6% respectively in the first two years after the spinoff. During 2015, the value of spinoffs at completion jumped 81% to $176 billion, the highest level in 15 years. Goldman expects this trend to continue throughout 2016. The prospect of modest top line growth coupled with flat margins this year is likely to push managements to pursue spinoffs as a means of generating shareholder returns. If the above forecast does play out, and a new wave of spinoffs hits the market this year, value investors will be spoilt for choice when it comes to picking undervalued, and unloved spinoffs that have been unfairly sold by the market. Unpopular spinoffs were plentiful last year. 18 of the 28 spinoffs that have taken place since June 15 had, at least, one of three alpha-generating attributes: Spinoffs Investment Strategies – Lower P/E multiple Spincos that traded at a lower forward P/E multiple than their parents outperformed their parents by 18 pp and 26 pp respectively during the one-year and two-year period after the spinoff. Goldman found the hit rate of this outperformance was 63% and 75% respectively. Lower expected EPS growth Spincos with lower twelve-month EPS growth expectations compared to the parents generated median excess returns of 21pp and 6pp respectively during the one-year and two-year period after the spinoff. The hit rate here was 81% and 56% respectively. Operated within a distinct industry versus their parents If the spinco and parent operate in different industries, the relative median return of spinco versus the parent was +3 pp for both one and two-year periods. If the two companies operated within the same industry, the performance was -7pp and +20pp. Spincos with a lower P/E multiple, lower expected EPS growth and operating in a different industry to the parent generated a median relative return of +29 pp and +47 pp versus their parents during the one-year and two-year post-spinoff periods, with hit rates of 80% and 90%, respectively. Click to enlarge And if you’re looking for ideas, 26 announced spinoffs are currently pending completion: Click to enlarge Disclosure: Rupert may hold positions in one or more of the companies mentioned in this article. You can find a full list of Rupert’s positions on his blog. This should not be interpreted as investment advice, or a recommendation to buy or sell securities. You should make your own decisions and seek independent professional advice before doing so. Past performance is not a guide to future performance.

Quant Strategies: Q1 2016 Performance

Here are the Q1 2016 total return and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the portfolios page. All equity portfolios consist of 25 stocks and were formed at the end of 2015. No changes in the holdings since that time. In the table below, I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices. Overall, the start of 2016 is working quite well for the various quant strategies. The utility strategy is leading the pack with a huge Q1. Only the microcap strategy is underperforming the relevant benchmarks. And that is after a great year in 2015. So not a big surprise. The staples value strategy continues to perform very well in almost every environment. I have been consistently surprised by this strategy. It’s probably due for a period of underperformance but not yet it seems. More aggressive versions of these strategies are also doing quite well. Ways to get more aggressive with these strategies are to run more concentrated portfolios, re-balance and check the portfolios more often, and in most portfolios the use of trailing stops enhances returns. A good stock and portfolio tool like portfolio123.com lets you do any of these quite easily. Also, for traders, the quant portfolios are fantastic idea generating lists for potential trades. I use them for this purpose every so often. In general, a great start to 2016 for quant strategies and much better than overall stock indexes and also the TAA strategies.