Chock full day.
More than 650 total attendees at the conference, including more than 500 registered attendees (mostly advisors), more than 80 sponsor attendees, nearly 40 speakers, and more than 30 members of the press. Up somewhat from last year.
Morningstar will soon start giving forward looking "aptitude" medal ratings to exchange traded funds. Will use same 5 Ps methodology as open ended funds. About 300 will be rated along with open ended funds in same category. EtF AUM now at $2.4T. While no plans yet to merge conferences, I believe it is inevitable for June and September Morningstar Chicago conferences to merge.
Lots of discussion of value and momentum strategies today. Fama calls the latter the premier anomaly in investing. AQR's Ronen Israel discussed facts and fiction. Despite that everybody knows benefits of each strategy, AQR believes it is fact that premia in each exist will continue.
One of Morningstar's brigthest, Alex Bryan, moderated a session on largely same topic by Gary Antonacci, Meb Faber, and Wes Gray. All disciples. Wes, probably the hardest core "believer" in pure value. But, data backs-up momentum as well. Why do these strategies persist? Because they are so utterly painful to stick with. Gary, however, uses an "absolute momentum" overlay (based on 12 month SP500 total return vs risk free) to mitigate drawdown, which he argues is more steady than simple moving average methods.
Met with John Ameriks, head of Vanguard's Quantitative Equity Group. He believes that a big reason "quants are winning" is that they provide a rules-based methodologies so investors better know what to expect. Unlike, say, the sometimes surprising behavior of active investors, like Fairholme's Bruce Berkowitz. John's group has 25 analysts and has been in existence for 25 years. At $30B in AUM, lots of responsibility here.
In a panel on "best ideas," Rich Bernstein, John West of Research Affiliates and Mark Yusko of Morgan Creek Capital Management seemed mostly conflicted. Bernstein believes cyclical equities and perhaps equities as a whole, will continue their bullish run. Expects excess returns the next two years for industrial's. But, the catastrophe will be bonds. Yusko, the most vocal, believes US stocks will crash in next year or so. Doomed based on valuations and demographics. He thinks that the only thing investors do well is invest in the last thing that worked. So, investing in index funds going forward will be catastrophic. While he dropped names like Seth Klarman of Baupost, Yusko's positions seemed to me ... hmm, what's a good word ... malarkey. West was most tempered of the trio, touting Research Affiliates benefits of all asset diversification, which always takes the 10 year view.
Took several other interviews, including a couple EtF managers that focus on EM consumers and Millennial consumers. Can you believe that? The PM at Iowa's Prinicpal, named Paul Kim, formally at PIMCO, seemed pretty impressive to me. More to come.
Looking forward to morning talk by Patrick O’Shaughnessy, entitled Alpha or Assets. As well as interview with Vanguard's Head of Equity EtFs and walking the exhibitor booths.
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