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Don’t Chase Past Performance In Asset Allocation – Look Ahead

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286.82 kB

Arabic & English Version

Investing requires us to battle with natural human tendencies such as extrapolating the past into the future. Quantitative portfolio optimization often favors assets that have positive outlier performance in the past but are often likely to revert to the mean going forward. More often than not, the circumstances for the manager's out-performance will not be repeated due to market environment changes or asset growth that dilutes the opportunity.

Time and time again we have witnessed that a large run up in performance drives significant AUM to the manager after the event but that performance is not sustained. Hubris and arrogance can also play a role whereby a portfolio manager ends up taking risks that would not have been taken in the past.

It is also a well known phenomenon that the most significant AUM growth occurs only after the best period of return has passed. Once the manager averts his attention to asset gathering, branding and keeping the status quo intact to build his business, the focus can change and result in lower returns. There are always exceptions to this tendency.

Hedgefund Insight - Don't Chase Past Performance

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162.92 kB

Investing requires us to battle with natural human tendencies such as extrapolating the past into the future.

Quantitative portfolio optimization often favors assets that have positive outlier performance in

the past but are often likely to revert to the mean going forward. More often than not, the circumstances for the manager's out-performancewill not be repeated due to market environment changes or asset growth that dilutes the opportunity.

Time and time again we have witnessed that a large run up in performance drives significant AUM to the manager .... Read more

Vital Assets - Energy Focus

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555.06 kB

A new paradigm
Middle East update
America's Oil Boom 2.0
Energy Efficiency
Renweable Energy

Vital Assets Update - Food & Water

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709.62 kB

Relationship between water, food and energy.
Major Drivers of growth and opportunity
Improving efficiency
The winds of change

Avoiding the Common Pitfalls of Asset Allocation

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195.54 kB

As fiduciaries we are constantly being bombarded with new investment theories, academic research, regulatory uncertainty and a near compulsive obsession with transparency and monthly mark to market valuation.

“Fear and greed” have been replaced by “risk on vs. risk off”, black swans have become regular domestic animals and fiduciary fatigue is changing the composition of investment committees all around the world.