Richard Cayne on Active or Passively managed Funds ? Does it really need to be either or could it be Both?

 

Active or Passive? Does it really need to be either or could it be Both?

With all the economic turmoil, issues and virus concerns seemingly everywhere you turn, in markets all over the world, many people are trusting managers of active investment products. Why pay higher fees for players in a rigged, or at the very least an incredibly tumultuous, game? Passive investment managers charge lower fees whose decisions are dictated by a pre-determined structure and strategy.

“This is a very black and white point of view that will do your investments more harm than good,” says Richard Cayne of Meyer International. Richard advises his clients to carefully consider both strategies – they each have their pros and cons, and they both can be part of a profitable financial plan.

What is active investing?

An active investment manager is actively engaged in deciding what and when to buy and sell. This sounds simple, but it is actually a very complex, involved commitment. The manager must research extensively and be able to quickly absorb and analyse market data to make decisions that will beat the market. Considering all the variables that affect a financial instrument, this is a profound undertaking. This is why active investment managers charge higher fees. But how well do they perform? In recent years, not so well. According to Morningstar’s Active/Passive barometer, active funds have been underperforming passive funds, especially over longer time periods.

So why bother with them? Under certain conditions, active investing can pay off very well. Before you hand your money decisions, do some research. Is the manager an expert in the fund sector or emphasis? If the strategy is too general, this usually does not bode well for active management. Also, success with this strategy often relies on being first in to profit most. In more developed markets, this is difficult since there is literally a wealth of information available. Emerging markets and sectors will often require specialised access and insights that can help active investing thrive. Also, active investing can respond immediately to sudden changes in the financial world, like the recent Brexit vote.

What about passive investing?

While active investing relies on an individual analysis of a specific dataset, passive investing looks to the overall performance of a certain group of equities or debts. Passive investing focusses on a certain index like the S&P500 or the DJIA or a set exemplar from a specific sector or exchange. Then investments are chosen that match that given group. The idea is that while it may be hard to predict a single investment that will beat the market, the market, whatever that may be, will perform consistently and, in times of loss, will eventually correct and profit.

So, while passive investing may not reap huge returns, it offers the possibility of dependable, constant returns that investors may feel they have more control over (since they will know at any time what investments are being made).

Now, what to choose?

So, there are many variables that can affect both strategies, for good and for bad. It would then not be wise to write off one for the other. When making any financial decision, all possible scenarios and options should be weighed, from how much risk you want to take to whether you believe certain sectors or markets are worth special attention.

“You really need to be realistic about what type of returns you’re expecting from your portfolio over a set time period,” Richard Cayne counsels. “Both active and passive investment strategies have their place, you just need to be thoughtful about what their places are for you. A good financial advisor should be able to work with you and help you plan appropriate allocation.”

“Also, a lot of people forget that their investment decisions are not set in stone,” Richard adds. “Markets fluctuate, so should you. There’s no need to make adjustments at every report of a downturn or potential economic hiccup, but you definitely should revisit your portfolio regularly with your advisor to make sure it reflects market trends and your risk appetite.”

For more information on this or any other financial topics, please contact Richard at Meyer International in Bangkok Thailand.

RICHARD CAYNE featured Seven Hills Japan Private Banking Continued

As featured in the Seven Hills magazine August 2007 edition; Private Banking services are not anymore reserved exclusively to the very wealthy explains Richard Cayne of Meyer Asset Management Ltd financial advisory in Tokyo Japan.  These days there are many options over Swiss private banks such as Life insurance companies or banks outside of Switzerland who are also based in tax neutral jurisdictions where they do not impose tax for non-residents of the area.  A Private bank account really offers in addition to advisory services a custodial account within which you can hold various assets such as stock, bond, mutual funds and hedge funds all within and from one central location.  Many offshore based Life insurance companies offer this custodial service at a very reasonable price with lower fees as compared to the traditional Private Banks making them a very good alternative.

Seven Hills magazine’s readers are High Net Worth Individuals in Japan

RICHARD CAYNE featured Seven Hills Japan Commodities Inflation

As featured in the Seven Hills magazine September 2008 edition; Commodities says Richard Cayne of Meyer should play a role in everyone’s portfolio to some degree as they can offer diversification into an asset class which is usually associated with hedging inflation risk. Normally over time commodities will keep pace with inflation and therefore a worthwhile addition to an investment portfolio. Commodity investments can take many forms from mutual fund and ETFs to direct holdings i.e. gold bars.

Seven Hills magazine’s readers are High Net Worth Individuals in Japan

Richard Cayne Meyer International Ltd – Inflation Coming To Japan

There is no question that inflation is here and will affect the average Japanese living in Japan in a more pronounced way than ever before in history says Richard Cayne who had lived in Japan for over 15 years in the 90s right up to 2010.

Richard Cayne Meyer said “During my time in Japan what was 100Yen in 1995 was 100 Yen in 2010.  This is far from “normal” in that having first hand experience seeing the prices of goods and services move upwards over the years Internationally as compared to back in my home city of Montreal Canada over the same period I felt as though nothing changed in Japan as the prices in Japanese Yen never seemed to move up much at all.  A very big shock is coming to most Japanese now that the Yen is finally weakening and inflation is coming online.

Japanese may not deal with this so well as few are prepared for inflation and what it means for to them and their purchasing power.  Most Japanese do not understand inflation or why there is need to get their money working for them and why it is so important to try and keep up with or outpace inflation”.  Richard Cayne at Meyer International Ltd therefore strongly suggests that growing ones money is an extremely important part of financial planning since inflation erodes the value of your hard earned savings.

Richard Cayne Meyer states “It will probably take a few more years of inflation where the average Japanese realize they have lost between 15-25% purchasing power of their currency by keeping it in a low yielding bank or post office account.  By then many financial companies with get on the bandwagon with campaigns showing how it makes sense to invest their money into something that can keep pace with or outpace inflation.  Of course that is exactly what Minister Abe wants and Richard Cayne is sure he will get his way.  Until then most Japanese will still resist the idea of investing as they view it to be risky, however after a few years of loosing their purchasing value of their hard earned savings they will start to change”.   Already it is happening and the poverty line in Japan is being tested by low income earners.  This is a trend that will continue for some time says Richard Cayne.

As Richard Cayne Meyer was in Tokyo Japan over a long time period of time he truly understands how pronounced and unbelievable inflation will be to Japanese over the coming years.  Particularly with seniors and Japan being a world leader in aging populations who typically do not invest at all and keep their funds in cash or cash like financial accounts.  Yet they rely not only on income but the need to preserve the spending power of their wealth and there is only one way to do that which is to invest in income producing and inflating assets such as in real estate and stock markets.  Richard’s suggestion is that Japanese need to start investing sooner rather than later.

Richard Meyer Cayne originally from  Montreal, Quebec Canada currently resides in Bangkok Thailand with his wife Akiko Cayne and their two young children and runs the Meyer Group of Companies www.meyerjapan.com.  Prior to which he was residing in Tokyo Japan for over 15 years and is currently CEO of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange listed Financial Holdings Company

Richard Cayne has been involved in wealth management  in Asia for over 19 years and has assisted many High Net worth Japanese families create innovative international tax and wealth management planning solutions.  The public company of which he is CEO can be seen at www.asiawealthgroup.com or stock exchange link http://www.isdx.com/Asia Wealth Group

Richard Cayne Meyer International – A Bubble Forming December 2013?

Over the past five years since November 2008, the U.S. Federal Reserve initiated its QE program over which time QE has become increasingly common in the global economic landscape notes Richard Cayne Meyer.

Other developed countries have emulated QE by launching similar programs, all of which helped cut borrowing costs and supported asset prices.

In fact, in the five years since QE took off, global equities have returned more than 15% on an annualized basis, treasuries close to 5%, and US high yield credit more than 20%.

This has been a great period for investment returns, but not so great for the growth of the global economy as many investors start to question the possibility of a bubble forming explains Richard Cayne at Meyer International Bangkok.

QE has distorted financial markets and, as a result, seems to have caused investor complacency.

The one month average level of bearish sentiment, measured by the American Association of Individual Investors is at levels last seen in early 2011 and 2012. On both occasions this level represented complacency.

Stock markets seem almost indifferent to whether fundamental economic data is good or bad, as support in the form of monetary policy acts as a safety net for investors.

This government intervention is occurring worldwide. Japan’s economics minister attempted equity strategy earlier in the year, setting a two-month target return of 17% on the Nikkei 225.

On the other side of the globe, ECB President Mario Draghi’s “do what it takes policy” in the eurozone implicitly guarantees positive returns on short-dated peripheral government bonds.

It is plain to see how investor complacency may arise from this powerful backing. Yet with investment returns having seen such a significant rise in the past five years, should investors prepare for an end to this upward momentum in the equity markets?

Despite concerns, this indifferent sentiment among investors has not pushed asset valuations beyond reasonable levels and Richard Cayne Meyer believe that to be very good news for investors.

Look at prices to earnings ratios in the equity markets, and at cyclically adjusted earning yields, it does not appear we are in a bubble.  The net result is a cyclically adjusted earnings yield of 5.4%. This represents about a 10% discount to the 20-year median yield of 4.9%, showing that after a significant rally over the last five years, share valuations are fair to slightly high.  Richard Cayne Meyer explains that the important point is there is scope for earnings to drive price appreciation.

Yet, investors should not expect a repeat of the 15% annualized returns they have enjoyed over the past five years.

Annual returns are likely to halve to around 7%-8%. Equally, it is highly unlikely high yield corporate bonds will continue to produce double-digit percentage returns.

Though a bubble does not appear to be emerging, investors should be aware that returns from equities may not be as impressive in the years to come, and inflation is also a risk.

Even moderate inflation could diminish returns for medium-term investors.

Although there will always be risks and warning signs to consider when investing in equities, Richard Cayne Meyer International believes we are not in the middle of a bubble in risk assets.

Richard Cayne Meyer a native of Cote St Luc, Montreal, Quebec Canada currently resides in Bangkok Thailand and runs the Meyer Group of Companies.  Prior to which he was residing in Tokyo Japan for over 15 years and is currently CEO of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange listed Financial Holdings Company.  Richard Cayne has a long history in the wealth management area starting in Tokyo Japan and has assisted many High Net worth Japanese Families plan for future generations. 

Richard Cayne Meyer Market trends November 2013

Richard Cayne Meyer remarks that China's leaders have unveiled a series of reforms aimed at overhauling its economy over the next decade. In a statement issued after a closed-door summit, they promised the free market would play a bigger role.

A new committee will oversee internal security to guard against social unrest, and farmers will be given more property rights over their land.

The Communist Party leaders said markets would be allowed to play a leading role. State ownership would remain a pillar of the economy. Richard Cayne at Meyer International comments that if China really backs these statements up with substance we are looking at what could be the start of the next China bull run up over the coming few years.

"The core issue is to straighten out the relationship between government and the market, allowing the market to play a decisive role in allocating resources and improving the government's role," the statement said, Reuters news agency reports.

Investors trends showed that investors fled U.S. equities last week as the stock market hit record highs and a clutch of imminent policy meetings worldwide increase economic uncertainty.

Fund flow data analyst EPFR Global says $7bn was pulled from U.S. equity funds it tracks over the week ending 6 November and flows into global equities “heavily favoured” funds that don’t invest the US noted Richard Cayne at Meyer International in Bangkok Thailand

The S&P 500 hit its highest ever peak last week, before a sharp sell off toward the week’s end as worries crept in about the how much value was left in the market.

Next year will see the global economy grow faster than in the two years previous with developed countries leading the way, says BNY Mellon chief economist Richard Hoey.

Hoey describes himself as being “broadly optimistic” on the outlook for the global economy overall in 2014 and expects both developed and emerging markets will see better economic growth throughout the year, compared with both 2012 and 2013.  Richard Cayne at Meyer International Ltd comments that he believes the US will achieve a higher inflation because of all the money the Fed pumped into the system through monetary easing and can easily see much more upside to the equity markets.

However Hoey details that developed markets will be the main driver of this expansion, implying that the fall back in emerging market growth versus developed economies seen already this year could be set to continue.

He says: “The outlook for 2014 I believe is for a faster pace of global economic expansion than occurred in 2012 and 2013 and that acceleration is likely to be led by the developed countries.”

The “fading burden” of the global financial crisis is attributed by Hoey as one of several reasons why developed economies are likely to push ahead in 2014 along with continued stimulative monetary policy across different developed countries.  Richard Cayne Meyer remarks that a new secular bull run is already under weigh.

Richard Cayne Meyer originally from Montreal, Quebec Canada currently resides in Bangkok Thailand and runs the Meyer Group of Companies.  Prior to which he was residing in Tokyo Japan for over 15 years and is one of the founding members of Asia Wealth Group Holdings Ltd a London, UK Stock Exchange Financial Holdings Company. 

How to Decide Whether to Invest In a Mutual Fund?

Richard Cayne Meyer says that an intelligent investor is one who has the time and determination to do his own investment research or hires professionals to do this on his behalf. It is advisable to hire a good financial advisor like Richard Cayne, but most investors hire only managers through the purchase of mutual funds.Let us look at some pointers on when it is a good time to invest in mutual funds.

Finding An Unbeatable Fund

Richard Cayne Meyer says that the trouble is that most managers are not able to give their investors value for their money. At times, the fees charged are so high that it affects a fund’s performance.In case the fund is an index fund, and holds over 100 stocks, it is possible that its performancewould closely track its underlying index.

When You Have No Choice

When investing in mutual funds is the sole choice available to an investor, the decision is only to choose the most suitable fund. Richard Cayne of Meyer suggests that even in this case, one should begin by investing in an index fund, which is selected with after careful research and analysis. Many retirement plans would offer a mix of funds, and most likely lead investors directly into individual securities.

Other Considerations

Managed mutual funds often get a bad reputation as a group overall, however when combining with index funds, they can be very useful to diversify and to get varied coverage over numerous asset classes. Richard Cayne of Meyer says that for numerous international markets, especially new ones, investing directly is not always the most practical way to invest.One would better advised to paya fee for active investment advice covering mutual fund investments that specialise in smaller markets. Richard Cayne of Meyer says that strangely, many European markets are not investor friendly, and thus definitely need a professional manager, to manage your funds. All the complexities of a market can be easily taken care of by a good fund manager.

The Conclusion

It is suggested by financial advisor like Richard Cayne Meyer that before buying any mutual fund, an investor should do thorough research of the market and compare various funds. For investors who wish to have a broad understanding of the market and wish to work diligently, this kind of research is suggested. However, it is definitely simpler to focus on buying one’s individual securities. On the whole, it is sensible to invest in mutual funds. In certain cases, like described above, this might be the only choice available for an investor, and then Richard Cayne of Meyer says that it is best to figure out how to choose the most suitable one.