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Brexciting?

Let’s talk or write about anything other than the EU referendum or the Euro football championships. A correlation study will probably emerge between the two!
We don’t know the outcome; neither do the polls. The bookies have been the best indicators in the recent history and are rightfully getting more coverage but poll predictions (and there are a lot of them!) give TV and newspaper journalists plenty to get excited about.  There’s been a shift to the ‘leave’ campaigners but from a low base.  Will that continue? Let’s see.  My one suggestion – vote. Moving swiftly on…
Impassive
As I sit here expressionless watching the rain fall heavily from the leaden skies through the office window approaching midsummer, I can recall the bludgeoning us active investors have received at the hands of those promoting passive investment solutions as the only sensible cost-effective way of investing. Of course we don’t subscribe to this opinion and as regular readers will know, that analysis is flawed on more than one account. Size being the main detractor, i.e. if you’re not too big as an investor, you can reap the benefits of smaller investors who are index-agnostic.  Why should an index or part thereof be the starting point for an investment portfolio?
To illustrate the point, I’ve selected the three Japanese managers we use in the T. Bailey funds as an example of how an unconstrained active manager can be a better investment option than a passive, index-related alternative. As many of our readers are aware, we choose to invest thematically and our Japanese allocation is part of one of our lesser-known themes, reform. Consequently, our Japanese weighting reflects our desire to be exposed to the improvement in corporate governance and returns to shareholders not variations in the JPY/USD exchange rate which gets plenty of air time.
The analysis below looks at our chosen funds’ performance over varying periods from three months to two years up to and including last Friday, 10 June 2016.
The first three lines are the funds we use, the last two lines are the Investment Association (IA) Japan sector and the TSE Topix index. The first column in each time period, is fund, sector and index performance.  The second column is the difference between our funds along with the sector average versus the index in bold.
16-06-14 Brexciting
 
 
 
 
 
 
 
 
As you can see, our three chosen funds have posted double-digit returns over each period while the IA Japan sector and the TSE Topix index have made modest single-digit returns.
So active management can and does work not least when it’s not constrained by the use of an index as a portfolio construction tool or being too large an investor.
 

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