[ { "abstract": "Of the three dimensions of investing - return, risk, and cost - investors have direct control only over cost. The subject here is five common assumptions about fees, which are a major component of costs. Three of the myths concern appropriate fee level and structure, fixed versus incentive, and the value of high water marks; two others concern fees in particular contexts. Do hedge funds deserve their high fees, and can investors always separate alpha from beta, and pay appropriately for each? The core thesis is that fees should not be an overriding investor concern, and high-fee products are worthwhile only if they deliver sufficiently high risk-adjusted returns.", "contributors": [ { "kgmid": "", "name": "Ronald N. Kahn", "sameAs": "" }, { "kgmid": "", "name": "Matthew H. Scanlan", "sameAs": "" }, { "kgmid": "", "name": "Laurence B. Siegel", "sameAs": "" } ], "datePublished": "2006", "doi": "10.3905/jpm.2006.628406", "journal": "The Journal of Portfolio Management, Vol. 32, No. 3, pp. 56-64", "keywords": [ { "kgmid": "", "sameAs": "", "term": "fees" }, { "kgmid": "", "sameAs": "", "term": "hedge funds" }, { "kgmid": "", "sameAs": "", "term": "alpha and beta" }, { "kgmid": "", "sameAs": "", "term": "investment management" } ], "title": "Five Myths About Fees", "url": "https://matthewscanlan.com/publications/five-myths-about-fees/" }, { "abstract": "A BGI research study using data from the Health and Retirement Study that simulated shocks to Social Security and home equity to strip out the false sense of security those assets provide. Key findings: among the middle wealth decile, 40% of total wealth comes from Social Security and home equity; controlling for reductions in government benefits and home equity, one-half of middle class Americans stand to lose 25% of their retirement wealth compared to expectations. The study identified the 'wealth effect' - counting illiquid home equity as spendable retirement wealth - as a major source of retirement insecurity, and proposed solutions at the government, employer, and individual levels.", "contributors": [ { "kgmid": "", "name": "Matthew H. Scanlan", "sameAs": "" }, { "kgmid": "", "name": "Jonathan Cohen", "sameAs": "" }, { "kgmid": "", "name": "Matthew O'Hara", "sameAs": "" } ], "datePublished": "2008-04-29", "doi": "", "journal": "Barclays Global Investors Research Study (not a journal publication)", "keywords": [ { "kgmid": "", "sameAs": "", "term": "retirement security" }, { "kgmid": "", "sameAs": "", "term": "Social Security" }, { "kgmid": "", "sameAs": "", "term": "home equity" }, { "kgmid": "", "sameAs": "", "term": "defined contribution plans" } ], "title": "The Future Shock of Retirement", "url": "https://matthewscanlan.com/publications/the-future-shock-of-retirement/" }, { "abstract": "Since the middle of the twentieth century, employees have reasonably expected their employers to provide a major part of the means by which they can retire. The traditional pension plan, known as the defined benefit (DB) plan, and one of the legs of the “three-legged stool” of retirement security, is the focus of this article. All three legs of the stool are now arguably in crisis, but if you like to find encouragement in small blessings, the problems of DB plans are in principle the easiest to solve. This article examines the current crisis and makes suggestions on a plan of action to rectify it.", "contributors": [ { "name": "Matthew H. Scanlan" }, { "name": "Carter M. Lyons" } ], "datePublished": "2006", "doi": "10.3905/joi.2006.635627", "journal": "The Journal of Investing", "keywords": [ { "term": "long-term investing" }, { "term": "retirement investing" }, { "term": "retirement" }, { "term": "pension funds" } ], "title": "The Retirement Benefits Crisis", "url": "https://matthewscanlan.com/publications/the-retirement-benefits-crisis/" }, { "abstract": "Although finance practitioners almost universally learn in school that the Sharpe market model, which separates all returns into alpha and beta, is the starting point for a number of key investment insights, they often forget, or disregard, this knowledge once they are on the job. The five most important insights that a practitioner should hold dear, regardless of what the boss says, are 1) the importance of making alpha and beta decisions separately; 2) the zero-sum nature of active management; 3) the different criteria needed to make alpha and beta decisions; 4) the great value of alpha successfully delivered; and 5) the desirability of paying appropriate fees for each return component or, in other words, high fees for alpha, low fees for beta.", "contributors": [ { "name": "Laurence B. Siegel" }, { "name": "M. Barton Waring" }, { "name": "Matthew H. Scanlan" } ], "datePublished": "2009", "doi": "10.3905/JPM.2009.35.2.025", "journal": "The Journal of Portfolio Management", "keywords": [ { "term": "portfolio theory" }, { "term": "exchange-traded funds and applications" } ], "title": "Five Principles to Hold Onto (Even When Your Boss Says the Opposite)", "url": "https://matthewscanlan.com/publications/five-principles-to-hold-onto/" }, { "abstract": "In this article, Donoho, Crenian, and Scanlan report the results of their study into the cost of institutional investor impatience. Using Monte Carlo simulation techniques, the authors construct an idealized world with a universe of investment managers of precisely quantified skill, with skill levels varying among the managers. Although many institutions base manager hiring decisions heavily on the manager’s performance in the most recent months or years, the authors’ simulations show that institutions that rely on longer performance horizons of 5–10 years are more likely to find and stick with the better managers. This happens because on shorter time scales, the relatively few highly skilled managers are often temporarily outperformed by one of the many lesser-skilled managers, specifically, unskilled managers who have recently happened to simply be lucky. Hence, if a plan that previously was long-term oriented starts to hire managers based on short-term results, it will often find that the newly chosen manager underperforms both his own previous performance and also the manager previously managing the plan’s funds. It can, however, truly take patience to keep a skilled manager in a fund portfolio. In the authors’ simulations, skilled managers have deeper, longer, and more frequent drawdowns than many investors would expect.", "contributors": [ { "name": "David L. Donoho" }, { "name": "Robert A. Crenian" }, { "name": "Matthew H. Scanlan" } ], "datePublished": "2010", "doi": "10.3905/jpm.2010.37.1.105", "journal": "The Journal of Portfolio Management", "keywords": [ { "term": "manager selection" }, { "term": "simulations" }, { "term": "portfolio management" }, { "term": "multi-asset allocation" } ], "title": "Is Patience a Virtue? The Unsentimental Case for the Long View in Evaluating Returns", "url": "https://matthewscanlan.com/publications/is-patience-a-virtue/" }, { "abstract": "Although the theory of active management suggests that breadth is the key to a high information ratio (IR) and thus success in active management, high conviction is another route to a high IR and one at which most investment management firms are more likely to succeed. High-conviction active managers are those that develop forecasts for a small number of securities that they are willing to hold in substantial weights. Such “concentrated active” funds deserve serious consideration by investors building broadly diversified portfolios of managers. The authors indicate how one might conduct the fundamental analysis leading to high-conviction portfolios. The principles discussed apply equally to long-only and long–short portfolio structures, although long–short investing involves risks (and thus risk-control disciplines) that long-only managers need not worry about.", "contributors": [ { "name": "Laurence B. Siegel" }, { "name": "Matthew H. Scanlan" } ], "datePublished": "2014", "doi": "10.3905/joi.2014.23.3.007", "journal": "The Journal of Investing", "keywords": [ { "term": "fundamental equity analysis" }, { "term": "portfolio construction" } ], "title": "No Fear of Commitment: The Role of High-Conviction Active Management", "url": "https://matthewscanlan.com/publications/no-fear-of-commitment/" }, { "abstract": "The movement toward indexation in the past decade has left many institutional investors thinking, “This can’t be all there is to my job. Let me learn something about active management.”\n\nIn an interview with Institutional Investor Journals, Larry Siegel and Matt Scanlan urge investors to include high-conviction active managers in their portfolios and describe how to identify those with true skill. The process of building a winning portfolio of managers is akin to a high-conviction manager building a winning portfolio of a few concentrated positions, they explain. Siegel and Scanlan discuss the evolution of their thinking on this topic and reveal some personal vignettes.\n\nSiegel is Gary P. Brinson Director of Research at the CFA Institute Research Foundation and Senior Advisor to Ounavarra Capital. Scanlan is Chief Executive Officer at RS Investments .", "contributors": [ { "name": "Larry Siegel" }, { "name": "Matt Scanlan" } ], "datePublished": "2014", "doi": "10.3905/pa.2015.2.4.101", "journal": "Portfolio Management Research Snapshots", "keywords": [], "title": "Practical Applications of No Fear of Commitment: The Role of High-Conviction Active Management", "url": "https://matthewscanlan.com/publications/practical-applications-of-no-fear-of-commitment/" } ]