WSJ: What Does Overweight Mean?

By SIMON CONSTABLE

When you hear market strategists use the words “underweight” and “overweight,” what exactly do they mean?

Those terms tell you how a portfolio manager is investing compared with a benchmark, says Bob Stammers, director of investor education at the CFA Institute. They can apply to individual investors, too. For many small investors, a rule of thumb is to put 60% of a portfolio in stocks. More than 60% is overweight; less than that is underweight.

Weightings differ depending on goals and risk tolerance. A higher stock allocation is typical for those willing to endure swings in prices. See original story here.

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WSJ: Timing Skill Missing from Almost All Multi-Asset Mutual Funds -- Study

By SIMON CONSTABLE

Everybody knows that over time, most active fund managers fail to beat the returns of the broader stock market. Well, when it comes to multiasset mutual funds—which attempt to zoom in and out of asset classes with deft timing—managers’ performance is especially bad.

Few managers of multiasset funds have any meaningful market-timing skill, according to research from academics at City University London’s Cass Business School and University College Cork in Ireland.

The study shows the lack of ability is particularly acute where it is needed most: in timing the stock market, where returns are more volatile but generally higher than in bonds. It is a worrying finding given that the only real reason to buy such funds is the asset-changing ability of the managers. Correct choice of asset allocation is said to account for 90% of returns.

“The managers were not very good at getting out of other asset classes and into equities,” says the lead researcher on the project, Prof. Andrew Clare, a director at the Center for Asset Management Research at Cass.

How bad is it?

Read more here.

Barron's: New Study Says Gasoline Prices Headed Higher

By SIMON CONSTABLE

For many investors, a coin toss may seem like the most reliable way to forecast U.S. gasoline prices. But researchers say they’ve developed a system to tilt the odds.

Unfortunately, their statistical technique indicates that gas prices are likely to march steadily higher over the next 18 months. Read more here.

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WSJ: North Africa Primed For Economic Growth Spurt

By SIMON CONSTABLE

For those looking for a sunny economic outlook, it might be worth a trip to North Africa.

Economic growth in Egypt, Morocco and Tunisia could surge as high as 6%-a-year, according to a new report from London-based firm Capital Economics. But they will only achieve that level with much-needed economic reforms the report’s author Jason Tuvey notes. See original story here.

Morocco

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WSJ: Why You Should Worry About Your Fund Manager’s Love Life

By SIMON CONSTABLE

When managers of hedge funds get divorced or married, it’s bad news for their investors. Their asset returns are likely to suffer. Worse still, the pain could last years.

That is the conclusion from a working research paper by academics at the University of Florida and Singapore Management University.

While the general news—that either event is distracting enough to lower job performance—might seem obvious, the paper goes further by answering the important questions: How much do investment returns suffer, and over what period? In short, returns get hit a lot, and the dip is long.

“We find that money managers significantly underperform during a divorce,” states the paper, “Limited Attention, Marital Events, and Hedge Funds,” by Yan Lu,Sugata Ray and Melvyn Teo. “The distraction induced by a marriage has a similar effect.” Read more here.

Cupid

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WSJ: What is a Bear Market?

By SIMON CONSTABLE

What do investors mean when they talk about a bear market? It depends on whom you ask.

Many say it’s when stock indexes drop by at least 20% in a short time. Some specify a two-month period. Others, however, see it differently. See original story here.

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Barrons: Time to Stock Up On Wheat

By SIMON CONSTABLE

Get ready for wheat prices to reach for the sky. In fact, depending on the weather, they could more than double from current levels.

How so? “Wheat supplies relative to global demand and relative to global trade are the lowest they have been in 50 years,” writes Shawn Hackett, author of the Hackett Money Flow Report, in a recent research note. What he looks at is the ratio of year-end inventories to the level of wheat that is traded on the global market. See original story here.

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