Takeaway No. 3: No Consensus On Fixed Income
In contrast to the long view on emerging-markets-related themes, there was absolutely no consensus on what to do in fixed income. A year ago, everyone I spoke with told the same story: It was time to shorten up on duration and take on a bit of extra credit risk. After watching one of the greatest rallies in the long bond in recent memory, people are now much more circumspect.
For every investor who was selling out of fixed income and shortening up substantially on duration, there was another one buying the 30-year bond. Perhaps Sage’s Anthony Parish had it right when he said: There’s always a bond bull market somewhere, and you just have to find it.
I got a real sense that many advisors are throwing up their hands and saying, “Why bother?” Yes, bonds are important. And yes, there have been some fantastic returns recently. But there was a palpable exhaustion in the audience regarding looking at the bond space and finding something attractive. People seemed to be out of fresh ideas.
Takeaway No. 4: The Hard Questions About Tactical ETF Investing
The people we had speaking at the conference were exceptionally smart, thoughtful and articulate. I find myself seduced whenever I listen to them, wanting to hand over my money to their careful stewardship. A lot of them do great work for investors.
But as I went through the day, I couldn’t help one thing in the back of my mind: These strategists haven’t repealed the laws of active investing. After expenses, the majority of these strategists will likely underperform the market as a whole.
The best strategists didn’t shrink from this challenge. There was a good discussion of the topic of “benchmarking,” with many arguing that benchmarking them to any single index was passé … that they should be benchmarked to client outcomes. Others seemed ready for the absolute challenge of outperformance.
I continue to think that the greatest investor of my generation—the one that will be venerated on the covers of Forbes, Fortunes and other old-school publications—will be pulled from this lot of so-called ETF strategists, using broad-based ETFs to implement macro strategies in the market.
The question is, How many other strategists will pile up in the wreckage as the top performers emerge?
It will be interesting to watch.
At the time this article was written, the author held no positions in the securities mentioned. Contact Matt Hougan at [email protected].