The Next Stage for Robo-Advisers

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Randy Cass, CFA, founder of Nest Wealth

The CFA Institute European Investment Conference is a focused, interactive conference for Europe’s leading investment professionals. The 2017 CFA Institute European Investment Conference will bring portfolio managers, analysts, chief investment officers, and CEOs together in Berlin on 16–17 November.

If you’re in the business of advising investment clients, Randy Cass, CFA, has some advice: You will become obsolete unless you figure out how to add value beyond client portfolio maintenance.

Cass is the founder of Nest Wealth, an independent digital wealth platform that is now the largest robo-adviser in Canada, and he sees a point in the near future where clients will be hard-pressed to know whether they are dealing with a human or a computer. Read More

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Antti Ilmanen Describes a Harsh Winter for Expected Returns

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The CFA Institute European Investment Conference is a focused, interactive conference for Europe’s leading investment professionals. The 2017 CFA Institute European Investment Conference will bring portfolio managers, analysts, chief investment officers, and CEOs together in Berlin on 16–17 November.

“I have got bad news as a starter,” Antti Ilmanen told the audience at the 2016 CFA Institute European Investment Conference. Ilmanen, who is a principal and researcher at hedge fund AQR, announced that “It is not only a low interest rate world, it is also a low expected return world on any long-only investment.” Low expected returns are going to anchor bad news for all of us for the rest of our working lifetimes, and maybe beyond.

Looking back to the rosier past, Ilmanen acknowledged the healthy 4% historic US equity risk premium, but points out that today that number is sitting at the bottom of its historic range. He suggested that for a balanced portfolio, the real return is heading down toward 1% per annum. And he is scathing about other asset classes, such as private equity and real estate. “Twenty percent — it ain’t realistic,” Ilmanen said. Read More

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Brexit Britain: Heading for a Variant of the Norwegian Model?

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Brexit panel discussion

“We are in unchartered territories, no country has ever left the European Union,” said Liam Halligan, economist and former fund manager, in a wide ranging panel discussion at the 2016 CFA Institute European Investment Conference. Four investment professionals on stage discussed whether Brexit will end up being a Norway model, a Swiss model, a Liechtenstein model, or a Turkey model, with the UK in the customs union, but out of the single market. Read More

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Five Themes Shaping the Future for Financial Professionals

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“I think that you will all agree that we are living in most interesting times. (Hear, hear.) I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety. (Hear, hear.)”

Joseph Chamberlain, British statesman, 1898

Few would disagree we live in “most interesting times.” Donald Trump as president of the United States, “Brexit” in the UK, and myriad other challenges have left many in the investment management industry wondering what the future holds. Read More

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Muhammad Yunus on Merging Charity with a Business Engine

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Muhammad Yunus

The CFA Institute European Investment Conference is a focused, interactive conference for Europe’s leading investment professionals. The 2017 CFA Institute European Investment Conference will bring portfolio managers, analysts, chief investment officers, and CEOs together in Berlin on 16–17 November.

Professor Muhammad Yunus, Nobel laureate, social entrepreneur, banker, economist, and founder of Grameen Bank, came up with a local idea that made global changes. At the 2016 CFA Institute European Investment Conference, he told delegates that his original intentions had nothing to do with banking or credit, but circumstances had pushed him into something he never expected. “I specialize in tiny, tiny, little investments,” he said. Read More

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How Do You Define Yourself?

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By Frederic P. Lebel, CFA


There are many ways to define yourself. It is a statement about what matters, what you deeply care about, and what has stood the test of time over the course of your life. Here are some words I often use to define myself: Swiss citizen, family man, keen investor, CFA® charterholder. What words do you use to define yourself? Read More

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Tomas Sedlacek at the Intersection of Economic Choices and Moral Values

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Tomas Sedlacek at the Intersection of Economic Choices and Moral Values

Is economics’ perception of itself as a torch bearer of scientific objectivity misguided? Tomas Sedlacek, Chief Macroeconomic Strategist at ČSOB, has suggested that classical economics hides moralism within its models. Yes, there is mathematical rigor in economics, but the math was developed in service to the mindset and values of the Western World, much of it based on the mythology and moralism of the three Abrahamic religions: Judaism, Christianity, and Islam. Read More

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Raised Expectations, Lowered Rates of Return

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Is Technology Making You Too Bullish on Stocks?

The CFA Institute European Investment Conference is a focused, interactive conference for Europe’s leading investment professionals. The 2017 CFA Institute European Investment Conference will bring portfolio managers, analysts, chief investment officers, and CEOs together in Berlin on 16–17 November.

In the aftermath of the Global Financial Crisis, central banks have pursued near-zero interest rate policies, followed by zero interest rate policies, arriving at negative interest rate policies in some countries. As rates continue their descent, their distortionary effect on expected returns has grown more pronounced, presenting investment managers with a difficult set of decisions.

A column in the Wall Street Journal noted that central banks’ interest rate policies have made everything more expensive than it looks. The column quotes Antti Ilmanen, a principal at AQR Capital Management, who says that “everything is expensive because this thing at the heart of the system has gone to all-time lows.” Lower interest rates make it difficult to determine the intrinsic value of an investment, which increases the risk that investment managers will pay too much for their investment returns. Read More

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Gleanings from Brexit: Recommended Links

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More than half a century ago, the assassination of U.S. President John Fitzgerald Kennedy was so shocking that everyone remembered what they were doing when they heard the news. For many investors, the United Kingdom’s EU referendum results delivered a comparable surprise. And during the referendum, hardly a single inflammatory division was left unexplored by combatants. Three key post-modern fractures have now been laid bare: declining deference to experts, rising public rage, and a return of national self interest.

Deference to Experts Is Dead

The UK’s EU Referendum campaign was challenged by a failure of the public’s trust that professional experts can help us solve our most difficult problems. During the campaign, experts of every kind, a metropolitan media elite and a parade of City luminaries threw everything they had at persuading UK residents that their best interests lay inside the EU project, notwithstanding its unpopular structures and troubled currency. Instead, and despite a sympathy swing after the assassination of Jo Cox, a UK Member of Parliament and a popular Remain campaigner, the experts failed to win public trust by the day of the poll. Read More

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What Can You Change For The Better?

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Ideas

The CFA Institute European Investment Conference is a focused, interactive conference for Europe’s leading investment professionals. The 2017 CFA Institute European Investment Conference will bring portfolio managers, analysts, chief investment officers, and CEOs together in Berlin on 16–17 November.

To think about how financial professionals can change the world, think first about how far we’ve come — I’m fond of reminding readers that it was once a fringe idea to examine accounting information and derive something of value for the investment decision-making process.

We didn’t arrive at modern best practices because a factor model fell out of a tree onto the head of a sleeping investor. The profession of investment management has developed over time through an iterative process where people tried different things, many of which were once considered too far from mainstream to be taken seriously. Read More

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