In this podcast, Adrian Cronje, who is the Chief Investment Officer at Balentine, discusses why traditional asset management fails to realize appropriate gains, particularly given the recent market collapse of 2007.
What should asset managers be doing to recover losses and approach active management in a more beneficial way? Adrian describes Balentine's approach to active management, the emphasis on lower cost and higher return allocations, and how the firm views risk management as a function of controllable external factors, such as liquidity.
Highlights from our episode:
Given rates of return from traditional asset management, the traditional tactics simply will not work well enough, particularly in a situation where many are trying to dig out from 2007-2009 losses
There is a better way to diversify, and Balentine does not believe that a 60% equity, 40% fixed income portfolio is balanced; nor does Balentine believe that calendar-based rebalancing serves the long-term manager, as it causes you to be unable to quickly respond to changes in the market and changes in the cost of investing in any one sector
As much as risk management might involve assessing exposures and diversity, it is also about managing the risks related to costs; volatility and liquidity are among the factors that clients can control in terms of their approach to asset management
An investor should desire a global mandate, securities that return over the long term, and the ability to sell stocks short in the event that you believe prices will fall
One pitfall to avoid is constraining a valuable asset manager with a particular investment mandate; the emphasis should be upon allowing your best managers to invest in the broadest scope of the market, where they can perform the best over a long-term period
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