Andrew Ang Discusses Asset Management (Masters in Business, 1hr 6 min listen)

(You can listen to the podcast by clicking here)

Andrew Ang leads US asset manager Blackrock’s factor-based strategies group. At 8 minutes in he highlights some enduring trading strategies (or smart beta/factors) such as value, small cap, and quality. He argues that they have not been arbitraged because they may be a reward for bearing risk, there could be a structural impediment (e.g. mandates may force funds to target high volatility strategies), or investors might have behavioural biases. Even though value strategies are seeing their fourth worst drawdown in a century, Ang remains confident the strategy will recover.

At 15 minutes, we hear about Blackrock’s new focus on factor investing in fixed income, currency, and commodity markets. Ang also disagrees with those who suggest that holding negative-yielding bonds is necessarily irrational. He suggests that if we see deflation in the future, then the yields would be positive in real terms. He also highlights  that extreme events such as banning gold holdings (as US President Roosevelt did in the interwar period) could make holding negative-yielding bonds, a safe-haven asset, attractive.

Finally, Ang discusses how he tilts portfolios towards a factor based on its own valuation (around 28 minutes in). This could be assessed relative the factor’s own history or compared to the performance of other factors.

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