Veteran investing columnist Ian Salisbury highlights in a Barron’s piece this week that Schwab is working on creating a new marketplace for alternatives, similar to its popular shopping market for open-end mutual funds. His article comes with a warning that “Schwab customers should beware. The higher fees that make alt investments potentially lucrative for Schwab are the same reason its customers should tread carefully before stepping in.”
Salisbury also highlights a new Harvard study. It finds that since around 2008:
— Even the biggest “general partner” active managers, who supposedly have access to the most opportunistic and advantaged private market deals, have seen their persistence in outperformance against public markets erode “materially.”
— The study’s authors add: “If there is little persistence among top quartile firms, then the selection of any GP is potentially a ‘random walk.’ If accurate, then investors should expect to achieve at best only average or median PE results.”
They also note: “There has been a shocking concentration of capital flows among a small number of firms. Is this a good attribute for the industry? Given the general lack of performance persistence among PE GPs, one should ask whether (i) capital is flowing to the best firms, (ii) capital is flowing based upon the “brand” of the PE firm, and/or (iii) capital flows are based on investors ‘looking in the rear view mirror’ or desiring one stop shopping?”
Not only are “traditional methods” of evaluating PE funds insufficient, according to the report, but “evaluating performance persistence post 2008 may be subject to doubt at the time the investment is made.”
Here is a free link to the study:
https://papers.ssrn.com/sol3/papers.cfm ... id=4803391
Here is a link to the Barron’s column (subscription required):
https://www.barrons.com/articles/schwab ... s-95872d94
Salisbury also highlights a new Harvard study. It finds that since around 2008:
— Even the biggest “general partner” active managers, who supposedly have access to the most opportunistic and advantaged private market deals, have seen their persistence in outperformance against public markets erode “materially.”
— The study’s authors add: “If there is little persistence among top quartile firms, then the selection of any GP is potentially a ‘random walk.’ If accurate, then investors should expect to achieve at best only average or median PE results.”
They also note: “There has been a shocking concentration of capital flows among a small number of firms. Is this a good attribute for the industry? Given the general lack of performance persistence among PE GPs, one should ask whether (i) capital is flowing to the best firms, (ii) capital is flowing based upon the “brand” of the PE firm, and/or (iii) capital flows are based on investors ‘looking in the rear view mirror’ or desiring one stop shopping?”
Not only are “traditional methods” of evaluating PE funds insufficient, according to the report, but “evaluating performance persistence post 2008 may be subject to doubt at the time the investment is made.”
Here is a free link to the study:
https://papers.ssrn.com/sol3/papers.cfm ... id=4803391
Here is a link to the Barron’s column (subscription required):
https://www.barrons.com/articles/schwab ... s-95872d94
Statistics: Posted by BetaTracker — Mon Oct 14, 2024 11:25 pm — Replies 0 — Views 77