Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Bank run spreads to Credit Suisse, ASX falls, materials, energy in focus
Another day, another recapitalisation of bailout of a major bank. It was all about global giant Credit Suisse (SWX:CSGN), the company that had been in the news in recent weeks due to a run of poor quarters and growing outflows from the bank. The Swiss National Bank was forced to offer as much as $81 billion in liquidity to the bank to avoid the issues faced by the Silicon Valley Bank in the US. Naturally, this sent markets lower, albeit not to the level that many would predict from the headlines, the S&P/ASX200 fell just 1.5 per cent. The hardest hit sectors were energy, down 4.8 per cent, and materials, down 3.2 per cent on concerns of a slowing global economy. BHP (ASX:BHP) shares fell 4.8 per cent after the company announced it would continue to fight UK court action against the Samarco disaster. Liontown (ASX:LTR) topped the market gaining 4.5 per cent.
Healthcare, quality shines, IPH sinks double figures, unemployment falls
Shares in Intellectual Property Holdings (ASX:IPH) fell by more than 10 per cent after the company exited a trading halt. The group confirmed it had been subject to a cyberattack on two of it’s member firms, which could impact on profitability. Interestingly, Fletcher Building (ASX:FBU) and Computershare (ASX:CPU) fell by more than 7 per cent each, suggesting a material change in their valuation, despite any specific economic news. On the positive side, 64,500 jobs were added to the economy, sending the unemployment rate down to 3.5 per cent and stoking predictions of further rate hikes. This despite growing weakness in the economy. Kelsian (ASX:KLS), the former Sealink travel group entered a trading halt after the company confirmed it would be acquiring All Aboard America$ for close to $500 million. Quality once again shone during the volatility with healthcare outperforming, up 1.5 per cent, behind CSL (ASX:CSL), and Cochlear (ASX:COH).
Markets surge on continued bank support, Adobe beats expectations, jobless claims slow
All three US benchmarks rallied strongly overnight, benefitting from news that Morgan Stanley (NYSE:MS) and JP Morgan (NYSE:JPM) would consider stepping in to recapitalise First Republic Bank, the latest bank to suffer significant risk of a bank run. The result was a 1.2 per cent gain in the Dow Jones, 1.8 in the S&P500 and 2.5 per cent in the Nasdaq. Shares in First Republic Bank (NYSE:FRB) were up more than double figures, which followed news overnight that Credit Suisse had received an $81 billion bailout of its own. Treasury Secretary Yellen also sought to calm account holders by reiterating the strength of the banking system. The news came as the ECB raised rates by another 50 basis points. Shares in Adobe (NYSE:ADBE) were among the top performers, gaining more than 5 per cent after the company reported flat quarterly profits but a significant increase in earnings expectations.
