8 June 2015

Registration Open: 2015 European Investment Conference

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Registration is now open for the 2015 European Investment Conference, held in London on 26–27 November. This year’s conference, which will deliver technical workshops for investment practitioners and valuable insights on the region’s most pressing economic developments, includes sessions with the following speakers:

  • Anne Richards, chief investment officer and head of the EMEA region at Aberdeen Asset Management.
  • Tim Harford, behavioral economist and columnist at the Financial Times.
  • Lorenzo Bini Smaghi, chairman of the board of SNAM and former member of the executive board at the European Central Bank.

At last year’s European Investment Conference, James Montier made his case against shareholder value maximization, Philippa Malmgren explained how geopolitical conflicts are connected to economic pressures, Elroy Dimson examined John Maynard Keynes’ track record as an investor, and a panel of experts discussed economic prospects for China and India.

This year’s conference, cohosted at London’s Guoman Hotel by CFA Institute and CFA Society United Kingdom, will gather Europe’s leading portfolio managers, analysts, chief investment officers, and CEOs for a focused, interactive experience and a unique opportunity to gain fresh insights.

Register now for an opportunity to strengthen your technical expertise and network with like-minded investors from across Europe.

This post was updated on 28 September 2015, to update the list of speakers appearing at the conference. Due to a scheduling conflict, Lord Sebastian Coe will be unable to participate.

Keep up with information and updates about this event by subscribing to the European Investment Conference blog.

All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

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23 October 2014

Shareholder Value Maximization: The World’s Dumbest Idea?

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James Montier, member, asset allocation team, GMO

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 agree with the economist John Maynard Keynes that “ideas shape the course of history,” then you ought to agree that the history of modern business and finance has been shaped by one influential idea: that the job of a company’s management is to maximize shareholder value. But according to James Montier, a distinguished investment professional and behavioural finance writer, shareholder value maximization is “a bad idea.” He believes it has not added any value for shareholders and has contributed to such major economic and social problems as short-termism and rising inequality.

Montier made his case against shareholder value maximization when delivering the closing keynote address at the 2014 European Investment Conference in London, a video of which can be viewed below. Read More

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Thinking Like Your Clients: Goals-Based Performance Analysis

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Stephen Campisi, CFA, head, institutional thought leadership, U.S. Trust

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.

Stephen Campisi, head of institutional thought leadership at US Trust, presented goals-based performance analysis as a radical departure from the usual attribution approach at the 2014 European Investment Conference. Campisi believes goals-based performance analysis is a vehicle that provides an opportunity to promote change in an organisation — or at least change in the way the organisation thinks — and also differentiate the organisation with the clients.

Why consider this approach? Campisi has looked at the duties to clients captured in the CFA Institute Code of Ethics and Standards of Professional Conduct and other fiduciary concepts, in which a professional has a duty of loyalty to his or her clients and must act with reasonable care and exercise prudent judgement. He concludes that from the perspective of the client, “it is better (for the manager) to be trustworthy than smart.”

Campisi argued that, embracing their fiduciary responsibilities, the manager needs to consider the “client view” when considering risk and return of the assets he or she manages and also how those assets relate to the broader mission and goals of the client. In fact, he believes the traditional ways for a manager to present investment ability and quantify risk and return may not address the client’s needs and point of view.

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21 October 2014

Are Currencies a Standalone Asset Class for Investors?

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Tarun Ramadorai, professor of financial economics at Saïd Business School at the University of Oxford

Speaking at the 2014 European Investment Conference, Tarun Ramadorai, professor of financial economics at the Saïd Business School, argued that currencies are increasingly seen as a standalone asset class for investors to consider as they build their portfolios. Ramadorai believes that currencies can be used in a “smart way to put together a portfolio that can be a complement with other portfolios in a variety of countries.”

This particularly well-attended session evaluated trends in the broader markets before diving into more technical aspects of various currency strategies. Ramadorai marvelled at how the last five years have seen a large expansion in the academic literature about the use of currencies as an independent strategy as well as a substantial increase in practitioner interest through exchange-traded funds (ETFs) and retail customer products. What this has shown is that investors are increasingly trading currencies in the same way they trade value and growth stocks strategies.

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What Is Next for Bond Yields?

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Steven Major, CFA, global head of fixed-income research, HSBC

At the 2014 European Investment Conference, Steven Major, CFA, global head of fixed-income research at HSBC, explained that a year ago, his team was criticised for predicting long-term government yields 1% lower than market consensus. He wished he had been wrong, but today, the term premium on long-end US bonds is negative.

To provide further analysis, Major evaluated four papers his team published in the past 12 months. He explained that “Just Another Sell-Off,” published in 2013, focused on term premiums and US bonds versus nominal GDP and highlighted that in the United States, secular factors are overriding cyclical factors and leading to negative term premiums, especially as half of the bonds were taken out of the market by the Federal Reserve Board.

The second paper, “Peak Rates,” published in February 2014, discussed the strong decline of the US five-year rate on five-year forwards while the five-year spot rate remains constant. He stated that as the market chose not to taper, the Fed was forced to adjust its policy — a typical case of the “tail wagging the dog.”

“Managing the Exit,” published in June 2014, and “US Curve Conundrum,” published in October 2014, reviewed the large-scale asset purchases (LSAPs) by the Fed, which led to the counterintuitive effect of a steepening yield curve. Major emphasised that the Fed created $2.7 trillion in excess reserves to finance these purchases. The only logical explanations as to why the Fed purchases led to a steeper yield curve, he added, are that the “flattening effects of the asset purchases were more than outweighed by the excess reserves — funding the ‘mother of all carry trades’ — and the forward guidance of not increasing interest rates in the near future.”

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20 October 2014

Geopolitics and Economics: Markets and Analysts Must Connect the Dots

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Geopolitical conflicts, from Ukraine to Syria, are connected to economic pressures, said Philippa Malmgren, president and founder of DRPM Group, at the 2014 European Investment Conference. Malmgren argued that financial analysts are largely unable to analyze this connection and financial markets fail to respond to geopolitical developments until they culminate in graphic headlines.

So, how are the two interconnected? Malmgren explained that an increase in the price of food and energy in a country can cause social unrest and can also raise concerns about food and energy security; governments may then be compelled to take bold steps to control the food and energy supplies for their populations. In addition, she believes the near skirmishes between fighter jets and naval ships of major military powers, such as the United States and China, are not random events — they are rooted in such concerns about national security.

Malmgren has had the opportunity to observe both politics and financial markets at close quarters. Her career includes stints as financial market adviser to US President George W. Bush and as deputy head of global strategy at UBS. Interestingly, in an instant digital poll, a clear majority of the investment industry professionals at the conference agreed that the investment profession needs to strengthen its ability to analyze geopolitical risks (71%).

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Keynes the Investor: Lessons to Be Learned

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Elroy Dimson co-directs the Centre for Endowment Asset Management at Cambridge Judge Business School

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.

John Maynard Keynes is widely regarded as a great economist. It is less known that he was also a very successful investor, pioneering techniques and establishing principles that have now become investment lore, said Elroy Dimson, co-director for the Centre for Endowment Asset Management at Cambridge Judge Business School, at the 2014 European Investment Conference. Dimson explained that access to the archives covering Keynes’s management of the endowment portfolio at King’s College, Cambridge, allows an objective review of his investment philosophy and performance.

When Keynes assumed authority over the endowment fund at King’s College in 1921, the fund was severely constrained by the Trustee Act, so he persuaded the College Fellows to separate a part of it into a discretionary portfolio over which he had complete control. Dimson argues that over the period 1922–1946, the annual performance of this portfolio averaged a return of 16%, compared with 10.4% for a market index calculated by Dimson and co-authors. Such outperformance did not come without commensurate risk: The tracking error was 13.9%, reflecting high levels of concentration. The resulting Sharpe ratio (reward to risk) of 0.73 seems like a good outcome for an active investor.

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18 October 2014

Lord Adair Turner: Solutions to the Real Estate Price Boom and Post-Crisis Recession

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Lord Adair Turner, senior fellow at the Institute for New Economic Thinking and a member of the UK House of Lords.

In his opening keynote address at the 2014 European Investment Conference, Lord Adair Turner, senior fellow at the Institute for New Economic Thinking, spoke to an audience of leading investment professionals about the shortcomings of “too big to fail” and inflation targeting. He proposed bold solutions to how governments, central banks, and regulators can work together to escape the excessive credit overhang in the real economy that has created a dangerous real estate boom and continues to depress global economic growth.

The economist began with an attack on the orthodoxies of pre-crisis central banking. “We need in future to develop policies which can prevent the buildup of real economy debt and leverage to excessive levels,” Turner said. “And that requires a wide-ranging rejection of pre-crisis orthodoxy as to the objectives and the tools of central bank monetary policy.”

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17 October 2014

What’s Next for China and India?

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The economic might of China and India has long been established, yet the question of what’s next for these two economic powerhouses has become pivotal. Facing headwinds in the form of slowing growth with concurrent opportunities for structural change and economic rebalancing, the ability of these two nations to navigate the changing economic landscape will shape the fortunes of the global economy.

In a lively panel discussion at the 2014 European Investment Conference, Russell Napier, ASIP, an independent strategist at and co-founder of Electronic Research Interchange (ERIC), contended that investors should be more optimistic about India than about China. His central thesis was that China’s export-driven growth model is not sustainable and its financial infrastructure is ill-equipped to support a shift toward domestic consumption as the driver of economic growth. He believes that although China’s banking system remains state controlled and ostensibly set up to fund production, India’s banking system comprises a larger share of private commercial banks and is thus equipped to fund consumption. Moreover, he added, there are three big structural factors in the United States that will eliminate China’s competitive advantage as a producer and exporter, namely:

  1. The emergence of shale oil and gas
  2. Demographics (specifically, deleveraging by the baby boomer generation in the United States)
  3. The newly competitive American industrial sector based on cheap energy, land, and labour

Napier illustrated the reversal of the trend in the current US account deficit (a barometer of China’s trade surplus) to underline his point that “the game is up” for China.
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Day 2 Recap from the European Investment Conference

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Kate Lander, CFA, CFA Institute head of education for EMEA, highlights key takeaways from the second day of the 2014 European Investment Conference in London. Alongside workshops that explored the conference theme, A Fresh Perspective: Checking Assumptions, Challenging Mindsets, Lander particularly enjoyed James Montier’s take on shareholder value maximization being the world’s dumbest idea.

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