Smart investors bank on finding the next Alibaba
Andrew Sheng says many eschew the publicly traded market to focus on the riskier SME market
The spectacular departure of Pimco bond whiz Bill Gross last month to join Janus Capital raised the question of whether it is the end of the bull run in bond markets that Gross successfully predicted in the 1980s.
Debt has grown faster than stocks because lower interest rates pumped up financial asset values, especially if such investments were leveraged.
With interest rates in advanced economies at historical lows, there are bubbles in both financial assets and real assets. With the US Federal Reserve threatening to withdraw quantitative easing as the US begins to show signs of recovery, bond markets and equity markets, especially in the emerging markets, are beginning to drop.
Even commodity prices are falling in the wake of a slowing Chinese economy. In fact, real estate markets are peaking and beginning to drop, as regulators begin to tighten credit for speculation.
Add to this brew the growing random shocks of Ukraine, Islamic State and Ebola, and it is not surprising that active fund managers are finding it tough to make money. The large pension fund Calpers recently announced it was withdrawing its money from hedge funds, citing high management fees and low performance.
Conventional finance theory argues that, in a world of perfect information and efficient markets, most investors can't beat the market. Professor Burton Malkiel, in his 1973 book A Random Walk Down Wall Street, suggested that a blindfolded chimpanzee throwing darts at The Wall Street Journal list of stocks could beat active portfolio managers.