Each quarter we explore a topic that we believe is relevant for our clients in understanding the current investment environment and the markets.
Investment Perspectives 2Q July 2011
Today’s investors must recognize two key developments: first, the growing economic extremes between the world’s wealthiest people and the poorest (particularly in the U.S.); second, the differing prospects of the middle class in the emerging versus developed world. This paper examines the investment implications of these contrasting profiles and discusses some of the opportunities and risks that they represent.
Asset Allocation 2011
We view 2011 as a year of continued positive growth economically but also as a year of increasing geopolitical volatility. These conditions support our view that an intelligently diversified portfolio with the flexibility to capitalize on meaningful opportunities is the appropriate approach for our clients.
Comments on Venture Capital
In 2006 Aureus wrote to clients explaining why private equity and venture capital were asset classes to be avoided. While many factors contributed to our view, fundamentally we felt excessive asset flows combined with a weak exit environment combined to create a poor return dynamic. Today, we believe venture capital in particular is an attractive asset class for clients with the appropriate profile.
Europe Sov Debt-Banking Crisis
Europe’s sovereign debt/banking crisis will not be finally resolved until the politicians decide that it’s better to face the consequences of a true solution, than to continue to postpone. To date, all that has happened is delaying the day of reckoning, through granting loans of enormous size to countries which have no realistic hope of ever repaying.
Investment Perspectives- Inflation
From Argentina to India to China, consumer price indices (CPI) outside the US are rising rapidly. Other parts of the developed world, including the US, still report nearly flat consumer prices. Low interest rates globally and mixed growth prospects make inflation a particularly important variable for different asset classes and specific companies.
Comments on Fixed Income Market Dec
Given the recent volatility in fixed income markets and negative media coverage, Aureus felt it important to offer the following commentary. While fixed income returns remain slightly positive for the year, bonds have lost most of the gains achieved from May through September. Fear of inflation and concerns over deficits, at the federal and municipal level, have exacerbated the situation.
Asset Allocation 2010
The Aureus base case asset allocation model for 2010 presents what we believe to be an optimal asset mix for our clients over the next two to three years. Given present uncertainties in today’s world economies and markets, we realize that making any long-term prediction is more than usually difficult.
Client Letter: Investment Perspectives Employment
Jobs, or lack thereof, are on everyone’s mind. Persistently high unemployment in the developed world has been a hallmark of the financial crisis and ensuing recession. While the recession in the US officially ended fifteen months ago, unemployment remains stubbornly elevated.
Only a year ago, following the bankruptcy of Lehman Brothers, the world appeared on the brink of a financial collapse that threatened to lead the real economy into a deflationary spiral. Today, the picture is very different. Global stock and bond markets have recovered very close to October, 2008, levels and the real economy, still reeling from the worst recession since World War II, is showing initial signs of improvement.
For much of the past several decades, fixed income investments had lower volatility and lesser returns than equities, and importantly acted in the market differently than equities. In 2008, everything changed. With the significant exception of Government bonds, many fixed income instruments became highly correlated with the stock market and produced negative total returns, thereby not protecting broadly diversified portfolios as much as past experience would have indicated.
Archived Investment Perspectives