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  • Credo Capital - The Time Is Now

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    Tedd a. Alexander: performance degradation for active strategies is structural or cyclical. He says in the past five years we have managed money during a debilitating recession. The chart below illustrates rolling three-year excess returns of 10 top mid cap growth strategies. The diminution of excess returns by all of these top managers is essentially in sync, he says.

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    Credo Capital - The Time is Now

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    Tedd a. Alexander: performance degradation for active strategies is structural or cyclical. He says in the past five years we have managed money during a debilitating recession. The chart below illustrates rolling three-year excess returns of 10 top mid cap growth strategies. The diminution of excess returns by all of these top managers is essentially in sync, he says.

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    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
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    77 vues2 pages

    Credo Capital - The Time Is Now

    Transféré par

    Anonymous Feglbx5
    Tedd a. Alexander: performance degradation for active strategies is structural or cyclical. He says in the past five years we have managed money during a debilitating recession. The chart below illustrates rolling three-year excess returns of 10 top mid cap growth strategies. The diminution of excess returns by all of these top managers is essentially in sync, he says.

    Droits d'auteur :

    Attribution Non-Commercial (BY-NC)
    Téléchargez comme PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 2

    Memo

    To: From: Date: Re: Ourvaluedrelationshipsandpartners TeddAlexander February22,2013 Thetimeisnow!!!

    Irecentlylistenedtoaconsultantmakeaverythoughtprovokingandwellresearchedpresentationinwhich sheposedthefollowingkeyquestion:Istheperformancedegradationforactivestrategiesoverthelast3plus yearsstructuralorcyclical?Ithoughtaboutthisquestioninthecontextofmyownexperiencemanagingour U.S.EquityMidCapGrowthstrategy.Asmanyofyouknowandsomeofyouexperiencedfirsthand,ithasbeen thetaleoftwocities,veryattractiveexcessreturns,riskadjustedImightadd,forpartofthetrackrecord, followedbypoorrelativereturnsforthemorerecentseveralyears.Excessiveemphasisonshorttermresults hascausedhandwringingonthepartofinstitutionalinvestorsleadinginsomeinstancestoterminationsand hascertainlycausedmetopersevereinthefaceofourownmountingclientconcerns. InameetingatCredothisweek,ourteamgatheredaroundtheconferencetabletodiscussupcomingclient presentations.Asisthenormalcourseofbusinessforus,wecontemplatednewanalysiswecouldpresentthat mightputintoperspectivetheperformancechallengeswehavebeenfacing.Thechartbelowillustratesrolling threeyearexcessreturnsof10topperformingmidcapgrowthstrategies.Thefirmsincludedinthisanalysis arethesameonesthatItrackquarterlyandthatyouhaveoftenheardmerefertoasourcompetitors.Thelist includesthemidcapgrowthstrategiesofsuchfirmsasFrontierCapitalManagement,TimesSquareCapital Management,WilliamBlair,GenevaCapital,tonameafew.

    225 E. REDWOOD STREET, 2ND FLOOR ~ BALTIMORE, MD 21202 PHONE: 410-244-6200 ~ FAX: 410-244-6444

    WhatwefoundwasaplausibleanswertothequestionposedbytheconsultantIreferencedabove.Itcertainly appearstousthatthetopmanagersinthemidcapgrowthspacegenerateexcessreturnscyclically.Thefactis inthepastfiveyearswehavemanagedmoneyduringadebilitatingrecessionandinamarketclimatefueled byglobalmacroevents.Itisveryclearinthecharttoobservethediminutionofrollingthreeyearexcess returnsbyallofthesetopmanagersduringthisperiod.Whilethetimingofentryintoandexitfromthecycle differsbyfirm,thedirection,duration,andmagnitudeoftheexcessreturnsareessentiallyinsync. Behavioralandemotionalconstraintsoftencauseinvestorsandconsultantsaliketobecomeoverwhelmed withfearandriskavoidanceatexactlythetimehistorywouldsuggesttheywouldhavebeenbetterservedto havebeenopportunisticandriskseeking.Theadagebuylowandsellhighisoftenusedandseldom followed.Infact,moreoftenwehaveexperiencedfirsthandbuyhighandselllow.Webelieveplansponsors andconsultantsexposedtoactivegrowthmanagersintheU.S.equitymarket,regardlessofmarket capitalization,riskfallingvictimtomakinguntimelydecisionsbasedonreactingtothecycleofthepastfive yearsthathasgenerallyfavoredpassivestrategies.Thatpassivestrategieshavefaredwellisnotterribly surprisingtousgiventhatthispastfiveyearperiodismarkedbyextremelyhighvolatilityandhighstock correlations.Consistentwithpastpostrecessionaryperiods,bothcorrelationsandmarketvolatilityeventually returntonormallevelsandpersistinthenormalphaseforyears.Itwasduringthispastnormalperiod,that mostofthesefirmsdeliveredsuperiorriskadjustedexcessreturns. Webelieveitistheearlystagesofanothernormalperiod.Withthisbeingthecase,weCredoCapital,along withothergrowthmanagers,expecttodeliverexcessreturnsthatcyclehigheraspreviouslyshown.Forthis reason,weurgeyoutoupdateyouranalysisonCredoCapitalandseriouslyconsidermakingnew/additional allocations.

    225 E. REDWOOD STREET, 2ND FLOOR ~ BALTIMORE, MD 21202 PHONE: 410-244-6200 ~ FAX: 410-244-6444

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