A paper published this week entitled The Death of Common Sense: How elegant theories contributed to the 2008 market collapse has garnered a fair bit of coverage in the financial media, resulting in headlines such as “Modern portfolio theory failing institutional investors” in Investment & Pensions Europe. But is it really true that theory led practitioners up the proverbial garden path? (more…)
The experience of two bear markets in the past decade reminded investors of the importance of diversification. This, coupled no doubt with some envy of the “endowment model” of the likes of Yale and Harvard universities, has caused many to increase their allocation to hedge funds. While this often makes sense, we think it’s important that investors set their expectations appropriately.
As Spain slips back into recession, the Spanish government has begun talks on ring-fencing the country’s bad property loans in one or more separate entities. While this may help, we doubt whether the move will be enough on its own to solve Spain’s problems, as our European banking analyst, Victoria Norman, discusses below.