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Active vs. Passive in the U.K.—A Follow-up

7,400
by Mark Hebner and IFA Contributors
Thursday, July 10, 2014

A few weeks ago, we published this article about the dismal performance of active managers in the U.K. We saw that only 1% of them were found to reliably beat a risk-adjusted benchmark, but even for that 1%, the managers extract the whole of this superior performance for ...Read More

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  • Transfer on Death and Retirement Account Beneficiaries

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    by Mark Hebner and IFA Contributors — Wednesday, July 2, 2014

    As you are probably aware, if you have an IRA, 401(k), or other type of retirement account, you must have a designated beneficiary(s). Normally, you will have a primary beneficiary as well as a contingent beneficiary in the event that both you and your primary beneficiary perish ...Read More

  • The Second Quarter of 2014 in Review

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    by Mark Hebner and IFA Contributors — Tuesday, July 1, 2014

    In the second quarter of 2014, market risk was rewarded around the world, particularly for emerging markets and real estate. Portfolios tilted towards small cap companies were not rewarded to the same extent as portfolios tilted towards large caps companies. On June 18th, the ...Read More

  • Q&A with IFA: Prediction in Valuations

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    by Mark Hebner and IFA Contributors — Monday, June 30, 2014

    Question: Do valuation measures such as price-to-earnings or price-to-dividend ratios help predict future returns? Are they telling us anything now? Note: The question above was originally addressed in DFA’s Fama/French Forumon December 11th, 2008, in the midst of the ...Read More

  • Q&A with IFA: Front Running and Fair Pricing

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    by Mark Hebner and IFA Contributors — Monday, June 23, 2014

    Question: What is the relation, if any, between the practice of "front running" trades and the efficient market hypothesis? Note: The question above was taken from DFA’s Fama/French Forum. Here is their response: “First, if front running is profitable, there must be ...Read More

  • Passive vs. Active—the View from Across the Pond

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    by Mark Hebner and IFA Contributors — Monday, June 23, 2014

    While perusing the Daily Telegraph, one of our Wealth Advisors came across this article that highlights the bloody awful results delivered by active managers in the U.K. Reporter Richard Evans cites Professor David Blake, one of the authors of this study  of 516 funds ...Read More

  • Mark Hebner and IFA Contributors

    Lord Abbett Funds: A Deeper Look at the Performance

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    by Mark Hebner and IFA Contributors — Friday, June 20, 2014

    On a few occasions, we have been asked by prospective clients about Lord Abbett funds. Like American Funds, they have been around since the Great Depression and are fully dedicated to active management. As of 12/31/2013, they had $137 billion1 of assets under management spread ...Read More

  • Q&A with IFA: Do Low-Volatility Strategies Produce High Returns

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    by Mark Hebner and IFA Contributors — Friday, June 20, 2014

    Question: Certain researchers have reported1 that low-volatility stocks in the U.S. outperform high-volatility stocks and attribute this apparent anomaly to investor behavioral biases as well as limits to arbitrage. What do you make of their argument? Note: The question above ...Read More

  • Is There a Manager Risk Premium?

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    by IFA Contributors — Friday, June 20, 2014

    A risk premium is the return in excess of a reference rate that an investment is expected to provide. At Index Funds Advisors, Inc., we often speak of three different equity-related risk premiums. First, the market risk premium is the expected excess return of the total U.S. ...Read More

  • Tough Times for the Bond King

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    by Mark Hebner and IFA Contributors — Thursday, June 19, 2014

    While patience is a virtue, it appears to be one that is not possessed by many investors in actively managed funds. It is this difficult lesson that PIMCO’s Bill Gross aka “The Bond King” has had to learn lately. According to this article/video, the PIMCO Total ...Read More

  • FINRA Calls Out Merrill Lynch

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    by Mark Hebner and IFA Contributors — Thursday, June 19, 2014

    When reviewing retirement plans for our clients or for retirement plan sponsor clients, we often see the presence of mutual funds with front-end loads (Class A shares). However, we have always made the assumption that the load is waived for retirement plan accounts, but after ...Read More

  • Passive vs. Active: Yet another Milestone Is Reached

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    by Mark Hebner and IFA Contributors — Monday, June 16, 2014

    According to this Bloomberg article, Vanguard just passed up Fidelity to become the number one provider of 401(k) assets, thus continuing the long-term trend of migration from passive to active that we have documented in several articles such as this one. The current size of the ...Read More

  • The NACUBO Study

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    by Mark Hebner — Thursday, June 12, 2014

    You may think that college endowments, with all their access to academic knowledge and brainpower, would regularly hit home runs. You would be ...Read More

  • A Graphical View of the Mutual Fund Landscape

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    by Mark Hebner and IFA Contributors — Wednesday, June 11, 2014

    Since IFA began operations in 1999, we have published articles detailing how incredibly stacked the odds are against successfully picking a manager who will beat his benchmark (i.e., deliver alpha). See here and here for recent examples. However, as we like to say at IFA, a good ...Read More

  • Tough Times for Alternative Investment Strategies and Hedge Funds

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    by Mark Hebner and IFA Contributors — Tuesday, June 10, 2014

    At Index Fund Advisors, we are always distressed when we read articles such as this one that discusses a state pension plan increasing its exposure to alternative investments (i.e., investments beyond stocks, bonds, and real estate). A recent article in the Wall Street Journal ...Read More

  • Q&A with IFA: Dividends—Is Bigger Better?

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    by Mark Hebner and IFA Contributors — Friday, June 6, 2014

    Question: Does an equity strategy focusing on stocks with above-average dividend yield offer an appealing risk/reward tradeoff? Have dividend-paying stocks outperformed non-dividend payers in the U.S.? Note: The question above was taken from DFA’s Fama/French Forum. Here ...Read More

  • Q&A with IFA: Expected Returns and Socially Responsible Investing

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    by Mark Hebner and IFA Contributors — Wednesday, June 4, 2014

    Question: Are expected returns for "socially responsible" strategies lower compared to a conventional approach? Note: The question above was taken from DFA’s Fama/French Forum. Professors Fama and French gave this response: “Our paper, "Disagreements, Tastes, ...Read More

  • Q&A with IFA: Cap Weighting or GDP Weighting

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    by Mark Hebner and IFA Contributors — Wednesday, June 4, 2014

    Question: What is the merit, if any, in using a country weighting scheme based on Gross Domestic Product (GDP) rather than market capitalization? Note: The question above was taken from DFA’s Fama/French Forum. Professors Fama and French gave this brief response: ...Read More

  • Q&A with IFA: Seeking the Inefficient Asset Class

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    by Mark Hebner and IFA Contributors — Tuesday, June 3, 2014

    Question: We often hear the claim that some markets are less efficient than others—small company stocks, emerging markets, foreign exchange, and so on. Is there any evidence to support this assertion? Note: The question above was taken from DFA’s Fama/French Forum. ...Read More

  • Q&A with IFA: Are Monthly Stock Market Returns Normally Distributed?

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    by Mark Hebner and IFA Contributors — Monday, June 2, 2014

    Question: Are Monthly Stock Market Returns Normally Distributed? What is the best way to describe the distribution of stock market returns—a normal distribution, lognormal, or something else? What should investors do with this information? Note: The question above was ...Read More