I’ve learned some very hard lessons about building a business around ETFs.  I’m sharing them here so that they can help other ETF innovators.

In October 2017, the Wall Street Journal published an article largely critical of Morningstar’s Star-Rating system.  The now infamous piece, “The Morningstar Mirage”, was well researched and written by seasoned journalists Kirsten Grind, Tom McGinty and Sarah Krouse.  Its main assertions were that star ratings were not predictive of future performance and that Morningstar had […]

If you’re a market index investor retiring in the next 10 to 15 years, you could be in trouble and not even know it.   If you can solve this riddle, you’ll understand why: Two investors; A and B Both begin investing on the same day Both start with $1000 Both invest over the same 50-year […]

This article focuses on the AlphaClone Hedge Fund Masters Index in the context of constructing the optimum portfolio.  When building an optimum portfolio, the objective is to figure out the portfolio weights across different asset classes that achieve a specific optimization goal.  Our analysis constructs four different portfolios, each optimized for a different outcome: Maximize […]

Moneyball for Hedge Funds If you’ve followed us for any amount of time, you know that our Clone Score methodology is at the heart of our manager selection process.  The best analogy for our process to think about a manager’s score like it was a “batting average” where every stock the manager selects is an “at […]

It’s been easy to argue against active management lately, too many funds to choose from, most of them underperform.  In an environment where the S&P 500 has returned 15% annually over the past five years (double its historical average), it’s no surprise investors are fleeing active funds for passive ETFs.   In that sense, investors […]

We take a definitive look at hedge fund holding periods. We analyze holding periods for all Form 13F disclosed securities as well as for those held with high conviction. We also look at whether the length of a manager’s holding period is predictive in any way to the efficacy of following their holdings.

The active vs passive debate continues unabated in the financial media. Passive strategies continue to accumulate assets while active strategies lose them causing many to proclaim that active investing is dead. Let’s take a step back and try to separate reality from hype.

The very nature of making investment decisions is difficult – an investor can only evaluate an investment based on historical returns and/or credibility. Yet both of these attributes are poor predictors of what the investor is actually paying for – future performance. Combine this with the fact that there are nearly 30,000 investment products to […]