When I began managing multi-asset investments in 1990, I believed fundamental valuation was the way to create superior performance. Today, I believe that fundamental valuation is necessary, but no longer sufficient. We have to navigate the path that prices take on their way to fundamental value.

That involves assessing shorter-term macro and geopolitical developments that push prices toward and away from fundamental value. This can be difficult because when big events happen, markets may move together. That is one of the reasons why we utilize fundamental-based currency management to a large extent.

We believe the best way to get macro diversification in our portfolios is to utilize active currency management to a large extent.

First, currencies tend to be uncorrelated with other assets over time, which means they can be a powerful diversifier.

Investing in currencies also adds a tool to our toolbox in our navigation of geopolitical developments, such as Brexit, because those developments often have a first effect on exchange rates. They push exchange rates either toward or away from their equilibrium exchange rate—fundamental value—as they get resolved.

In addition, the differentiated central bank policies and behaviors around the world influence currencies. We’ve seen quantitative easing not just in the United States, but now occurring across the world, and it’s affecting exchange rates.

Lastly, our research and experience demonstrates that prices converge on fundamental value for currencies faster than for equities and for bonds. That means that fundamental value can be a very powerful influence for currency management. This shorter reversion horizon provides the opportunity to more quickly exploit value/price discrepancies for currencies than for markets.

For these reasons, we believe the best way to get macro diversification in our portfolios is to utilize active currency management to a large extent.

Still, we also have to assess the impact of macro events on market prices. Inflation has the biggest influence on fixed income assets, so these geopolitical developments have recently had a relatively small impact on fixed income.

But equity prices are very susceptible to market events (such as geopolitical developments and central bank activity) because these events can ultimately change corporate cash flows.That, in turn, affects how efficiently a company is able to produce and export.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
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RSS FEED

Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
Cookie Policy | Social Media Disclaimer | Privacy & Security | FINRA’s BrokerCheck

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