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Monthly Archives

July 2014

Why Endowment Funds Like Yale’s Are Doing Just Fine

By News

The Ivory Tower geniuses atop the country’s most respected endowments have recently received a firestorm of criticism for failing to produce outsized returns during the current bull market. But investors must accept that all investment strategies experience periods of underperformance and it’s hardly a reason for endowments to hang their heads.

Investors tend to have short memories and forget that these same endowments outperformed the stock market over the past decade with much less volatility.

Looking at the Yale Endowment investment policy’s achievements, Prateek Mehrotra, MBA, CFA®, CAIA®   points out that their main goal is to “diversify across seven asset classes that all act independent of each other in different economic environments.” This leads to more stability and the ability for endowments to generate outsized returns that operate with an extremely long time horizon. Taking advantage of special situations, an ability available due to the diversified portfolio, allows them to distinguish an absolute return strategy and has been a factor in their growth by more than six fold over two decades.

To read the full article:

http://www.thinkadvisor.com/2014/07/31/why-endowment-funds-like-yales-are-doing-just-fine

 

EWM Number of the Day: 7/31/2014

EWM Number of the Day: 7/29/2014

EWM Number of the Day: 7/28/2014

Which measure of Wage Inflation is optimal?

By Inflation Watch

The Labor Department measures wages and salaries in many different forms:

Each measure has pros and cons when it comes to capturing true wage trends and inflation pressures in the economy. Unit labor costs, for instance, take into account productivity, but growth can be very volatile. The average hourly wage is timely and broad-based, but it can be affected by shifts in employees between high- and low-paying positions.

To find out which best correlates with quarterly core inflation, the J.P. Morgan economists regressed yearly inflation (using the Fed’s preferred measure, the personal consumption expenditure index excluding food and energy) on year-over-year percent changes of the various wage gauges.

The best fit came with the employment cost index. “It would seem the ECI’s strengths outweigh its weaknesses,” they conclude.

(Source: WSJ)

 

Japan’s consumer inflation slows to 3.3% in June

By Inflation Watch

Japan’s consumer prices rose 3.3 percent in June from a year earlier for the 13th consecutive month of increase, but the pace of increase has been slowing in recent months, government data showed Friday.

The core consumer price index, excluding volatile fresh food prices, stood at 103.4 against the 2010 base of 100, the Ministry of Internal Affairs and Communications said. The figure was in line with private-sector forecasts.

The data have been affected by the consumption tax hike since April. After excluding the direct effect of the tax rise, the inflation rate in June comes to 1.3 percent, according to the Bank of Japan, which aims to achieve a 2 percent rise in or around fiscal 2015 in order to revive the country’s economy.

The nationwide core CPI continued rising, but the pace of rise was slower than 1.4 percent in May and 1.5 percent in April, both without the effects of the tax rise.

Regarding the outlook, the BOJ expects the consumer inflation rate to move around 1.25 percent for some time amid waning upward pressure from import prices, particularly those for energy. But the central bank also says inflationary pressure will continue, partly citing improving domestic demand.

The April 1 tax hike, which raised the rate to 8 percent from 5 percent, is weighing on consumer spending in the country. The BOJ has been cooperating with the government in boosting the economy out of nearly two decades of deflation, introducing in April 2013 aggressive monetary easing measures to achieve the 2 percent inflation goal within around two years.

The apparent slowdown in consumer inflation as confirmed by the latest price data may add to prospects the BOJ will remain committed to keeping its monetary policy sufficiently accommodative. But as the CPI is still moving roughly in line with the bank’s forecasts, it is less likely that the BOJ will immediately take action to additionally ease the policy.

EWM Number of the Day: 7/24/2014

IPOX-linke​d U.S. IPO ETF (FPX) set to benefit as Facebook surges after earnings – Now matches Google post-IPO !!!

By ETF Related

Facebook stock gained +5.51% to USD 75.22 in after-hours trading, a new post- IPO high.

An investment product set to benefit from Facebook’s surge is the USDm 487 First Trust U.S. IPO Fund (ticker: FPX), a five-star (3/5 years) fund. Linked to the IPOX U.S. 100 (IPXO) and launched in April 2006, the fund invests in the largest 100 U.S. domiciled IPOs and Spin-Offs using the IPOX Index technology, providing an asset allocation focused approach to the “going public” effect in respective companies.

Included on 9/21/2012 into FPX, Facebook’s +311.85% rise during the first 459 trading days in the ETF now closely matches the post-IPO performance of Google (GOOGL US), which had gained +343.43% during the same post-IPO time period.

FPX IS AN ETF WITHIN OUR PRIVATE EQUITY MODEL.

Changing Venture Capital Landscape

By Venture Capital

Where are we today?

  • We have 2.4 billion Internet users, or 50x more than before.
  • Online connections are 180x faster at 10.5 Mbps.
  • 164 million US smartphone users gives us “always-on” mobile connectivity
  • We’re all socially connected, so great businesses spread faster.
  • We all have one-click purchase power through Apple, Google, Amazon and eBay.
  • The VC market has right-sized, returning back to mid 90’s levels with less competition.
  • The cost to start a business is 95% lower, meaning many more companies are created and funded by angel and seed investors.
  • It still takes venture capital to scale a business, which means large amounts of capital go into industry winners like Uber, Airbnb and Snapchat.

It doesn’t take a huge leap to see how well the VC industry is positioned for the immediate future. LPs have taken notice as 2014 is by all accounts the busiest year for LPs since the Great Recession began as it is forecast that between $25-30 billion to be invested in some 200 venture funds. Where will these dollars go and how is the industry changing?

Read the slide deck below to get an excellent overview of the venture capital industry:

It’s morning in VC

(Sources: Upfront Ventures, Fortune Term Sheet)

 

EWM Number of the Day: 7/23/2014