La asset allocation, il private banker e il robot
Diciamolo chiaramente: “asset allocation” è una espressione che ,,, “fa figo”: dà importanza, ispira pensieri elevati, profuma di competenza.
Al di là dell’impatto fonetico ed emotivo, però, c’è poco: la “asset allocation” è un concetto che viene utilizzato a mani basse dalle Reti di vendita fatte di wealth managers, private bankers, promotori di ogni tipo, personal bankers e familiy bankers, per colmare un vuoto. Il loro vuoti di competenza.
La asset allocation, in questo contesto commerciale di vendita, è qualcosa di banale, un modo semplificato di intendere la gestione del portafoglio titoli. Qualcosa che potete farvi da soli, amici lettori, anche la mattina presto mentre vi fate le abluzioni con il collutorio. Sono sufficienti cinque minuti..
Mettete i vostri soldi un po’ di qui un po’ di là, di più in Europa, un po’ meno negli USA ed ancora meno sui mercati Emergenti, dividete tra azioni ed obbligazioni, un po’ di materie prime, e il gioco è fatto.
Potete farvela anche da soli, anche per il fatto che la “asset allocation” che vi propongono in massa tutti i venditori delle Reti e delle banche non funziona.
Non funziona per una lunga serie di ragioni, e noi in questo Blog ne scrivemmo in modo chiari ed approfondito già molti anni fa.
Oggi la realtà dei mercati finanziari ci fornisce nuovi spunti per ritornare su quelle nostre considerazioni di anni fa.
Quando il private banker, il wealth manager, il “consulente autorizzato alla vendita fuori sede” viene a trovarvi a casa, vi fa regolarmente vedere i soliti grafici colorati, che sono stati progettati dal loro ufficio marketing per convincervi che
nel lungo periodo le azioni salgono sempre; e poi anche che
se vuoi più rendimento in portafoglio metti più azioni, mentre se vuoi stare più al sicuro metti più obbligazioni
Tutte e due queste affermazioni sono false, e lo abbiamo già ampiamente documentato anche nel Blog e con molti dati (alcuni dei quali li leggete nuovamente nei grafici di questo Post)..
Oggi però, alla metà dell’anno 2021, è utile riprendere in considerazione la seconda delle due affermazioni.
Chi si è affidato alla seconda delle due affermazioni riportate sopra potrebbe ritrovarsi, già nel secondo semestre 2021, alle prese con problemi grandissimi, come spiega benissimo l’articolo che abbiamo scelto qui per voi.
There’s nothing more beautiful to a professional investor than a negative correlation between stocks and bonds. When stocks have a bad month, bonds have a good month, and vice versa. Since their zigs and zags offset each other, the value of the combined portfolio is less volatile. The customers are pleased. And that’s how it’s been for most of the last two decades.
But for almost a year now, Bloomberg market reporters have been detecting anxiety from the pros that the era of negative correlation may be over or ending, replaced by an era of positive correlation in which stock and bond prices move together, amplifying volatility instead of dampening it. “Bonds Have Never Been So Useless as a Hedge to Stocks Since 1999,” read the headline on one article this May.
Yet hope springs eternal. The headline on a July 7 article was, “Bonds Are Hinting They’ll Hedge Stocks Again as Growth Bets Ease.”
In the big picture and over long periods, it’s obvious and necessary that stock and bond returns are positively correlated. After all, they’re competing investments. Each generates a stream of income: dividends for (most) stocks, coupon payments for bonds. If stocks get very expensive, investors will shift money into bonds as a cheaper alternative until that rebalancing makes bonds more or less equally expensive. Likewise, when one of the two asset classes gets cheap it will tend to drag down the other.
When the pros talk about negative correlation they’re referring to shorter periods—say, a month or two--over which stocks and bonds can indeed move in different directions. Lately two giant money managers have produced explanations for why stocks and bonds move apart or together. They’re worth understanding even if your assets under management are in the thousands rather than billions or trillions.
Bridgewater Associates, the world’s biggest hedge fund, based in Westport, Conn., says that how stocks and bonds play with each other has to do with economic conditions and policy. “There will naturally be times when they’re negatively correlated and naturally be times when they’re positively correlated, and those come from the underlying environment itself,” senior portfolio strategist, Jeff Gardner says in an edited transcript of a recent in-house interview.
According to Gardner, inflation was the most important factor in the markets for decades—both when it rose in the 1960s and 1970s and when it fell in the 1980s and 1990s. Inflation affects stocks and bonds similarly, although it’s worse for bonds with their fixed payments than for stocks. That’s why correlation was positive during that long period.
For the past 20 years or so, inflation has been so low and steady that it’s been a non-factor in the markets. So investors have paid more attention to economic growth prospects. Strong growth is great for stocks but doesn’t do anything for bonds. That, says Gardner, is the main reason that stocks and bonds have moved in different directions.
PGIM Inc., the main asset management business of insurer Prudential Financial Inc., has $1.5 trillion under management. In a report issued in May, it puts numbers on the disappointment the pros feel when stocks and bonds start to move in sync. Let’s say a portfolio is 60% stocks and 40% bonds and has a stock-bond correlation of -0.3, which is about average for the last 20 years. Volatility is around 7%. Now let’s say the correlation goes to zero—not positive yet, but not negative anymore, either. To keep volatility from rising, the portfolio manager would have to reduce the allocation to stocks to around 52%, which would lower the portfolio’s returns. If the stock-bond correlation reached a positive 0.3, then keeping volatility from rising would require reducing the stock allocation to only 40%, hitting returns even harder.
PGIM’s list of factors that affect correlations is longer than Bridgewater’s but consistent with it. The report by vice president Junying Shen and managing director Noah Weisberger says correlations between stocks and bonds tend to be negative when there’s sustainable fiscal policy, independent and rules-based monetary policy, and shifts up or down in the demand side of the economy (consumption). The correlation is likely to be positive, they say, when there’s unsustainable fiscal policy, discretionary monetary policy, monetary-fiscal policy coordination, and shifts in the supply side of the economy (output).
One last thought: It’s a good idea to spread your money between stocks and bonds even if they don’t hedge each other. The capital asset pricing model developed by William Sharpe in the 1960s says everyone should have the same portfolio, consisting of every asset available, and adjust their risk by how much they borrow. True, not everyone agrees. John Rekenthaler, a vice president for research at Morningstar Inc., wrote a fun article in 2017 about the different strategies of Sharpe and fellow Nobel laureate Harry Markowitz.
La parte finale dell’articolo qui sopra cita Harry Markowitz e William Sharpe, due nomi che vi potranno essere utili per ricordare che per investire senza andare a sbattere contro il muto sarà utile non limitarsi a leggere quello che scrive il Trader Fenomeno nella chat della vostra piattaforma di trading. Si tratta di un invito quindi ad allargare l’orizzonte informativo,
Recce’d, per i propri Clienti, svolge anche questo ruolo di supporto, informativo ed anche formativo, ogni gionro, ogni settimana, ed ogni mese da oltre 13 anni.
Per i nostri amici lettori di questo Blog, l’articolo che segue (che sta nel nostro archivio, e che risale a cinque anni fa) può fare da utile esempio e lettura introduttiva a temi che risulteranno fondamentali nella gestione del portafoglio titoli nei prossimi mesi ed anni.
Should You Own the Market Portfolio?
Two Nobel Laureates, two answers.
Aug 25, 2017
Most people who have studied investing believe that they should possess the market portfolio. With their U.S. stocks, they shouldn’t pick and choose; rather, they should own as many positions as possible, presumably through broad index funds. Ditto for their bonds as well as for their overseas holdings. This belief comes courtesy of Professor William Sharpe, who won a Nobel Prize for his troubles.
Of course, most investors don’t follow this precept precisely. They don’t hold a single broad-market index for each asset class. Nonetheless, if they invest through funds rather than through stocks directly, investors will end up owning something that approximates Sharpe’s recommendation.
They will pay more than the annual 3 basis points levied by iShares Core S&P Total US Stock Market (ITOT) (catchy moniker that) or Schwab US Broad Market (SCHB), and their portfolios will fluctuate around those benchmarks, but their results shouldn’t stray too far from the mark.
As my colleague Paul Kaplan (to whom this column owes a debt) reminds me, this faith in the market portfolio deserves some rocking. Critically, Sharpe’s conclusion when developing the Capital Asset Pricing Model—that the market portfolio was the single best portfolio for all investors—depends upon the assumption that investors can and will borrow to leverage their portfolios. In addition, the interest rate for their borrowing costs must be the risk-free rate.
Counterpoint
In practice, of course, most investors—even among institutions—don’t borrow, and if they do attempt such a thing, they are not granted the risk-free rate. This has a dire effect on the CAPM. Writes fellow Nobel Laureate Harry Markowitz (who received his award on the same day as Professor Sharpe), if we “take into account the fact that investors have limited borrowing capacity, then it no longer follows that the market portfolio is efficient.”
In fact, continues Markowitz, “This inefficiency of the market portfolio could be substantial and it would not be arbitraged away even if some investors could borrow without limit.” He then defends that statement formally, for those who enjoy such treatments. Suffice it to say that while the equations are past the scope of this column, the upshot is not: Markowitz was correct on the math. His results have not been challenged.
Better Betas?
Markowitz draws a straightforward investment conclusion. In the theoretical world of the CAPM, investors achieve extra return by borrowing to buy additional equities. That is, they increase their portfolios’ betas by putting more money to work at a beta of 1.0 (the market portfolio), rather than investing the same amount of money in stocks that have higher betas. In the actual world, not so much.
That is because without borrowing, only the latter strategy is possible. Those who accept the CAPM’s conclusion that beta alone determines a stock’s expected future returns, and who are willing to accept above-market risk in exchange for potentially above-market gains, must purchase higher-beta equities. No ifs, ands, or buts. That is their only choice. Such investors must reject the market portfolio by doubling down on volatile stocks and skipping the tame ones.
The problem is, such behavior introduces pricing distortions. If enough investors adopt this mindset—a likely occurrence, given how many assets are held either by institutions that have very long time horizons, or individuals who have decades of expected life remaining—then higher-risk stocks will become overbought. Too much money will crowd into the same subset of securities, which will reduce their expected returns. Conversely, the low-beta stocks will be relatively neglected, and will outdo their forecasts.
Those results have indeed occurred since the CAPM was introduced, leading some to speculate that Markowitz got it right, even if he didn’t form his argument as a prediction. Readers appreciated the CAPM’s logic, which earned Sharpe fame, but the publication of the theory didn’t much change their habits. For the most part, those who sought greater returns continued not to leverage their portfolios, and continued to seek extra profits by purchasing riskier stocks. The stock market acted largely as it always did.
Creating Ripples
The effect of restricting leverage doesn’t stop there. For every pricing distortion, the financial markets have a potential counter-distortion—a reaction against the original movement. That is, if higher-beta stocks did indeed become overpriced due to excess demand and lower-beta stocks underpriced (only a hypothesis—this is not a topic that lends itself to proof), and investors perceive that pattern, then stock buyers may change their collective behavior. Perhaps they will flock to low-beta stocks.
Which then might cause further reverberations. None of which matter for the purposes of this discussion. The point is, once the door is opened such that some participants should refuse to hold the market portfolio, then all manner of beasties can slip into the room. The theory does not permit the halfway—either it holds, or it doesn’t hold. And it doesn’t hold.
Getting Personal
None of which, of course, demonstrates that buying the market portfolio is a mistake, or that thinking of such a position as a “neutral” starting point is wrong. The market portfolio may well be an appropriate choice, and it surely is the most sensible of starting points. The prospective investor in U.S. stocks has several thousand publicly traded alternatives. Absent further information, the most-logical portfolio is that which owns them all, in proportion to their worth.
However, there is further information. In addition to Markowitz’s observation, which affects all market participants (the pricing of high-beta securities being independent of one’s individual circumstances), there are a host of personal factors that could lead the logical investor to deviate from the market portfolio.