Capital Allocators – Inside the Institutional Investment Industry WTT: Active Management Today is a Single Decision
Aug 5, 2023
Discover how the astonishing rise of the 'Magnificent Seven' tech giants impacts active management strategies. Explore the questions of equity allocation in today's concentrated market. Delve into the intricacies of currency hedging and its effects on investment performance. Hear insights on the challenges fund managers face and the importance of clear communication in navigating these strategies. This conversation offers a thought-provoking look at modern investment practices.
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Korean Hedge Fund & Samsung
- Ted Seides recalls a hedge fund manager in Korea with a large Samsung position.
- Despite this, the manager was net short Samsung due to index shorts, highlighting index concentration's impact.
Index Funds and Magnificent Seven
- Active management underperformance since the GFC is linked to index fund growth and the S&P 500's strong performance.
- This performance is driven by the Magnificent Seven tech companies, which benefited from the internet revolution.
Magnificent Seven Dominance
- The Magnificent Seven's concentration in the S&P 500 and MSCI ACWI is unprecedented due to their similar risk factors.
- This makes the allocation to these seven stocks the single most important decision for active managers today.