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Tuesday, 04 January 2022 10:04

Largest Hedge Fund Gets New Leadership

Bridgewater is the world’s largest hedge fund and their current CEO stepped down in a recent memo. Former CEO David McCormick is planning on running for a US Senate seat. Stepping into the leadership role will be Nir Bar Dea and Mark Bertolini in a shared leadership role. Bridgewater has had three different CEOs since Ray Dalio stepped down in his capacity as chief executive. Bridgewater gained a cult-like following for its radical transparency in the financial world where individuals rate and score their co-workers. Bar Dea is a relatively young executive in the hedge fund industry, but the pairing is seen as complementary in their shared CEO role. Bridgewater manages over $150 billion in pensions.

FINSUM: Hedge funds made a huge splash in 2021 by avoiding a lot of public turmoil and investing privately, we’ll see if that trend and those returns continue in 2022.

ARK Innovation is one of the leading model portfolios and has become a household name in the last year, but it looks like the bubble has finally popped or at least deflated. Huge losses in big holders like Zoom, Teladoc Health, and Roku are down over 30% and the only thing keeping the fund floating has been a stellar Tesla performance. This has many investors worried about the broader market because equity prices are inflated. Furthermore, the gap between large-cap growth stocks and smaller caps is as wide as it has been since 2000. Maybe this means an equity bubble could pop, but it could just mean small caps have more value now than ever.

FINSUM: High P/E ratios should have investors cautious at the very least. If the Fed threatens to huff and puff anymore the whole house could come down!

Saturday, 01 January 2022 06:18

Get Ready for More Robust ESG Requirements

Teradata, a leader in cloud computing made some big predictions for the Financial world in 2022. The biggest change is more AI adoption and software development in banking. Branches have closed in Europe and America and supplementing this with AI will be key. They also anticipate widespread adoption of the cloud in banking, but this could come with systemic risks as this is a new frontier for a small number of firms and failure could be catastrophic. Finally, regulators are going to take a step up in 2022 when it comes to ESG. These changes will mean more data analytics and statistics. Banks and companies will work independently to provide emissions data that can satisfy regulators as to their ESG status.

FINSUM: The cloud brings great efficiency for portfolio software moving forward; a one-stop-shop for lots of metrics and management tools!

Saturday, 01 January 2022 06:13

Should You Jump on Direct Indexing in 2022?

Direct indexing, along with ESG and active funds, has been the dominant narrative in 2021, but that could be the case going forward. Morgan Stanley published a report predicting direct indexing to grow by over 300% to a $1.5 trillion industry. Companies like BlackRock, JPMorgan Chase, and Vanguard (among many others) are racing to bring a previously exclusive opportunity to more investors. The biggest advantage is taking advantage of the individual stock ownership by realizing losses for tax purposes, which studies have shown can increase portfolio returns by about 1%. Realize this comes at a cost because this has a more active tilt to it which comes with higher fees and costs. This could be a net benefit as direct indexing costs are about 0.17-0.27 percentage points higher on average and clearing the tax returns.

FINSUM: To the layperson direct indexing is the active wolf in sheep’s clothing, but they take more advantage of tax-loss harvesting than traditional active investing, benefiting their clients.

Friday, 31 December 2021 06:49

Biden Has Big Regulations Coming

Biden was expected to come into the presidency with a tough regulation on Wallstreet. However, the snail’s pace with which Biden replaced key financial regulatory figures, hindered the quick change many expected, but now many officials are in place and change is coming. One of the biggest areas of the crackdown will be on stable coins and other digital currency as the federal government views them as systematically risky. Additionally the Biden admin will begin constricting new fintech lenders, who many in the admin see as pseudo-banks without any of the stringent regulation that affects the real banking industry. This is all part of larger changes that will take a more restrictive stance on Wallstreet undoing a lot of friendlier policies from the Trump administration and will include other central topics like climate change.

FINSUM: With many regulators now in place real change could be coming to the street, the tech-related products which are viewed as unregulated to this new administration.

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