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Actively managed funds were evaluated by American Funds over five and ten year periods to see which factors might contribute to their successes. The funds were broken into four categories: all actively managed funds, funds with lowest costs, funds with the highest manager ownership, and funds that had both low costs and high ownership.
Actively managed funds with high ownership and low costs significantly outperformed the other three types. Those with highest ownership only came in second, and those with lowest cost came in third.
“That cheaper was better is no surprise, nor that more manager ownership was beneficial,” John Rekenthaler wrote. “It also is no shock that funds that combined the two attributes of low cost and high ownership fared best of all. However, I would not have predicted that manager ownership would be the stronger of the two effects. Merely tilting toward organisations that had high manager ownership, without regard to any other factor, moved active international funds to be even with the costless index and pushed active U.S. stock funds moderately ahead of their benchmark.”
UBS Was Ordered To Pay Puerto Rico $US5.2 Million (The Wall Street Journal)
UBS was ordered by Puerto Rico’s financial regulator to pay $US5.2 million in fines and restitution “over the bank’s sale of bond funds that lost value because of the island’s ongoing fiscal troubles,” reports Matthias Rieker.
Six UBS financial advisors were also placed under “enhanced supervision” because, according to the regulator, “they may have been engaged in ‘objectionable’ sales practices.”
UBS will pay $US1.7 million in restitution to 34 clients. The other $US3.5 million will be paid to an investor education and investigation fund.
The Federal Reserve probably will not be rushing to hike short-term interest rates because the global economy is slowing, inflation is declining, and the US dollar is rising versus other currencies, writes Kathy A. Jones.
But “rather than waiting on the sidelines for the Fed to begin hiking rates, we suggest investors look to the intermediate-term portion of the yield curve to earn income,” writes Jones.
Because yields are currently low across the spectrum and the yield curve is steep, long-term maturities will “likely be highly sensitive to a rise in interest rates”, and short-term securities “don’t offer much potential for income,” she adds.
This week the 10-year Treasury yield dropped to its lowest level in over a year — to below 2%. This dip will naturally have implications on investors’ bond portfolios.
“Favour longer-dated Treasuries. The 10-year Treasury yield still appears attractive relative to sovereign rates elsewhere in the world. In addition, longer-dated Treasuries also look more attractive than those with two- to five-year durations, which are likely to exhibit the most volatility and be most vulnerable to rising rates,” writes Rick Rieder.
Additionally, investors should look at long-end municipal debt. Long-end municipal bonds are still relatively attractive, especially because of “improving issuer credit conditions and higher tax revenues,” writes Rieder.
“Top performers are focused on revenue, revenue, and revenue,” writes Matt Sirinides. Top performing firms were focused on getting their advisors to be more productive than other firms’ advisors. Contrastingly, worse performing firms were more focused on operations productivity.
Additionally, “top performers recognise the value in carefully monitoring and shaping their client base,” writes Sirinides.
Finally, the owners of top performing firms were more hands-on than their peers at worse performing firms. In fact, the owners at top firms tended to be the most productive advisors.
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