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<br /> Global themes in asset management<br /> Our little rough guide<br /> The value of investments and the income from them can go down as well as up and your clients may get back less than the<br /> amount invested.<br /> The above document is strictly for information purposes only and should not be considered as an offer, or solicitation, to deal in any<br /> of Aberdeen’s investments or funds and does not constitute investment research as defined under EU Directive 2003/125/EC.<br /> Aberdeen Asset Managers Limited (“Aberdeen”) does not warrant the accuracy, adequacy or completeness of the information and<br /> materials contained in this document and expressly disclaims liability for errors or omissions in such information and materials.<br /> Any research or analysis used in the preparation of this document has been procured by Aberdeen for its own use and may have been<br /> acted on for its own purpose. The results thus obtained are made available only coincidentally <a title="Global themes in asset management 2015 page 1" href="http://viewer.zmags.com/publication/765cdb28?page=1"> Global themes in asset management Our little roug</a> <a title="Global themes in asset management 2015 page 2" href="http://viewer.zmags.com/publication/765cdb28?page=2"> The value of investments and the income from them</a> <a title="Global themes in asset management 2015 page 3" href="http://viewer.zmags.com/publication/765cdb28?page=3"> Preface “Life is not illogicality; yet it is a t</a> <a title="Global themes in asset management 2015 page 4" href="http://viewer.zmags.com/publication/765cdb28?page=4"> Contents Chapter 1: Simplicity </a> <a title="Global themes in asset management 2015 page 5" href="http://viewer.zmags.com/publication/765cdb28?page=5"> Acknowledgements Our thanks to those who gave us</a> <a title="Global themes in asset management 2015 page 6" href="http://viewer.zmags.com/publication/765cdb28?page=6"> Simplicity Increasing complexity defines the fu</a> <a title="Global themes in asset management 2015 page 7" href="http://viewer.zmags.com/publication/765cdb28?page=7"> This KPMG study also found that half of all mains</a> <a title="Global themes in asset management 2015 page 8" href="http://viewer.zmags.com/publication/765cdb28?page=8"> Erosions of economics of information In an academ</a> <a title="Global themes in asset management 2015 page 9" href="http://viewer.zmags.com/publication/765cdb28?page=9"> His view is that complexity breeds activity like </a> <a title="Global themes in asset management 2015 page 10" href="http://viewer.zmags.com/publication/765cdb28?page=10"> Key points • Simple can be harder than complex: </a> <a title="Global themes in asset management 2015 page 11" href="http://viewer.zmags.com/publication/765cdb28?page=11"> Banking is not simple Banking performs badly in a</a> <a title="Global themes in asset management 2015 page 12" href="http://viewer.zmags.com/publication/765cdb28?page=12"> catching a frisbee is remarkably common. Casual e</a> <a title="Global themes in asset management 2015 page 13" href="http://viewer.zmags.com/publication/765cdb28?page=13"> Aberdeen viewpoint “There’s far too much complexi</a> <a title="Global themes in asset management 2015 page 14" href="http://viewer.zmags.com/publication/765cdb28?page=14"> Sources Munich Personal RePEc Archive, “Epistemo</a> <a title="Global themes in asset management 2015 page 15" href="http://viewer.zmags.com/publication/765cdb28?page=15"> Long-termism Concerns about short-termism in m</a> <a title="Global themes in asset management 2015 page 16" href="http://viewer.zmags.com/publication/765cdb28?page=16"> The struggle has been to try to understand and pr</a> <a title="Global themes in asset management 2015 page 17" href="http://viewer.zmags.com/publication/765cdb28?page=17"> Kay and Cox reviews in the UK Two important initi</a> <a title="Global themes in asset management 2015 page 18" href="http://viewer.zmags.com/publication/765cdb28?page=18"> behaviour, because investors cannot easily assess</a> <a title="Global themes in asset management 2015 page 19" href="http://viewer.zmags.com/publication/765cdb28?page=19"> Key points • A culture of greed and entitlement </a> <a title="Global themes in asset management 2015 page 20" href="http://viewer.zmags.com/publication/765cdb28?page=20"> So it is in our very nature Kay’s main emphasis i</a> <a title="Global themes in asset management 2015 page 21" href="http://viewer.zmags.com/publication/765cdb28?page=21"> Returning again to taxation, the tax distortions </a> <a title="Global themes in asset management 2015 page 22" href="http://viewer.zmags.com/publication/765cdb28?page=22"> In areas such as social housing, asset managers f</a> <a title="Global themes in asset management 2015 page 23" href="http://viewer.zmags.com/publication/765cdb28?page=23"> Sources “Short-termism and US Capital Markets: a</a> <a title="Global themes in asset management 2015 page 24" href="http://viewer.zmags.com/publication/765cdb28?page=24"> Transparency Concerns following the global fina</a> <a title="Global themes in asset management 2015 page 25" href="http://viewer.zmags.com/publication/765cdb28?page=25"> Then there were concerns about the transparency o</a> <a title="Global themes in asset management 2015 page 26" href="http://viewer.zmags.com/publication/765cdb28?page=26"> Client communications In the area of client commu</a> <a title="Global themes in asset management 2015 page 27" href="http://viewer.zmags.com/publication/765cdb28?page=27"> Other trust-building measures the IMA addresses a</a> <a title="Global themes in asset management 2015 page 28" href="http://viewer.zmags.com/publication/765cdb28?page=28"> Transparency may be the most promised and least p</a> <a title="Global themes in asset management 2015 page 29" href="http://viewer.zmags.com/publication/765cdb28?page=29"> The relatively new technology component of to tra</a> <a title="Global themes in asset management 2015 page 30" href="http://viewer.zmags.com/publication/765cdb28?page=30"> people uncomfortable, although this is increasing</a> <a title="Global themes in asset management 2015 page 31" href="http://viewer.zmags.com/publication/765cdb28?page=31"> He points out that risks will come from different</a> <a title="Global themes in asset management 2015 page 32" href="http://viewer.zmags.com/publication/765cdb28?page=32"> Sources The Wall Street Journal, “To grow we mus</a> <a title="Global themes in asset management 2015 page 33" href="http://viewer.zmags.com/publication/765cdb28?page=33"> Merrill Lynch Wealth Management, “Outlook 2031” (</a> <a title="Global themes in asset management 2015 page 34" href="http://viewer.zmags.com/publication/765cdb28?page=34"> Behavioural economics With the effects of the </a> <a title="Global themes in asset management 2015 page 35" href="http://viewer.zmags.com/publication/765cdb28?page=35"> The erosion of confidence in conventional portfoli</a> <a title="Global themes in asset management 2015 page 36" href="http://viewer.zmags.com/publication/765cdb28?page=36"> The policy suggestions from this team involve bec</a> <a title="Global themes in asset management 2015 page 37" href="http://viewer.zmags.com/publication/765cdb28?page=37"> This proposal prompted CFA-registered blogger Dav</a> <a title="Global themes in asset management 2015 page 38" href="http://viewer.zmags.com/publication/765cdb28?page=38"> What other kind of finance? Behavioural finance is </a> <a title="Global themes in asset management 2015 page 39" href="http://viewer.zmags.com/publication/765cdb28?page=39"> Value investing matters In 2000, Christopher H. B</a> <a title="Global themes in asset management 2015 page 40" href="http://viewer.zmags.com/publication/765cdb28?page=40"> Key points • Neoclassical economic analysis assu</a> <a title="Global themes in asset management 2015 page 41" href="http://viewer.zmags.com/publication/765cdb28?page=41"> chance of short-term gains is very attractive, an</a> <a title="Global themes in asset management 2015 page 42" href="http://viewer.zmags.com/publication/765cdb28?page=42"> “The extremes of human emotion prevent the stock </a> <a title="Global themes in asset management 2015 page 43" href="http://viewer.zmags.com/publication/765cdb28?page=43"> Sources “Applying behavioural economics at the F</a> <a title="Global themes in asset management 2015 page 44" href="http://viewer.zmags.com/publication/765cdb28?page=44"> “Modern Portfolio Theory and the Myth of Diversifi</a> <a title="Global themes in asset management 2015 page 45" href="http://viewer.zmags.com/publication/765cdb28?page=45"> Active Management The stresses of a low-return</a> <a title="Global themes in asset management 2015 page 46" href="http://viewer.zmags.com/publication/765cdb28?page=46"> Equity risk premium, mean reversion debunked That</a> <a title="Global themes in asset management 2015 page 47" href="http://viewer.zmags.com/publication/765cdb28?page=47"> Active management – key points • The “great mode</a> <a title="Global themes in asset management 2015 page 48" href="http://viewer.zmags.com/publication/765cdb28?page=48"> How active fell from grace Before considering wha</a> <a title="Global themes in asset management 2015 page 49" href="http://viewer.zmags.com/publication/765cdb28?page=49"> This view is reinforced in a paper by South Afric</a> <a title="Global themes in asset management 2015 page 50" href="http://viewer.zmags.com/publication/765cdb28?page=50"> The role of “high alpha” UBS, in another report l</a> <a title="Global themes in asset management 2015 page 51" href="http://viewer.zmags.com/publication/765cdb28?page=51"> This “high alpha” theme is expressed in a report </a> <a title="Global themes in asset management 2015 page 52" href="http://viewer.zmags.com/publication/765cdb28?page=52"> “high alpha” business. It is under pressure from </a> <a title="Global themes in asset management 2015 page 53" href="http://viewer.zmags.com/publication/765cdb28?page=53"> Active management – the Aberdeen view The main cr</a> <a title="Global themes in asset management 2015 page 54" href="http://viewer.zmags.com/publication/765cdb28?page=54"> Sources Kirshni Totaram, Coronation Fund Manager</a> <a title="Global themes in asset management 2015 page 55" href="http://viewer.zmags.com/publication/765cdb28?page=55"> “Credit Suisse Global Investment Returns Year Boo</a> <a title="Global themes in asset management 2015 page 56" href="http://viewer.zmags.com/publication/765cdb28?page=56"> Global Convergence For almost two centuries, t</a> <a title="Global themes in asset management 2015 page 57" href="http://viewer.zmags.com/publication/765cdb28?page=57"> Such a shift, however, is not uniform across emer</a> <a title="Global themes in asset management 2015 page 58" href="http://viewer.zmags.com/publication/765cdb28?page=58"> Brilliant also explains the changes around tradit</a> <a title="Global themes in asset management 2015 page 59" href="http://viewer.zmags.com/publication/765cdb28?page=59"> Kermal Dervis, Vice President and Director of Glo</a> <a title="Global themes in asset management 2015 page 60" href="http://viewer.zmags.com/publication/765cdb28?page=60"> Interdependency and income disparities Dervis poi</a> <a title="Global themes in asset management 2015 page 61" href="http://viewer.zmags.com/publication/765cdb28?page=61"> Governance issues On the broader theme of the ext</a> <a title="Global themes in asset management 2015 page 62" href="http://viewer.zmags.com/publication/765cdb28?page=62"> estimates the number of people worldwide defined a</a> <a title="Global themes in asset management 2015 page 63" href="http://viewer.zmags.com/publication/765cdb28?page=63"> The results show that all analysed developed equi</a> <a title="Global themes in asset management 2015 page 64" href="http://viewer.zmags.com/publication/765cdb28?page=64"> yielding safer low returns and speculative higher</a> <a title="Global themes in asset management 2015 page 65" href="http://viewer.zmags.com/publication/765cdb28?page=65"> Sources The World in 2030: Are we on the path to</a> <a title="Global themes in asset management 2015 page 66" href="http://viewer.zmags.com/publication/765cdb28?page=66"> “Investing in 2013”, UBS (November 2012) http://b</a> <a title="Global themes in asset management 2015 page 67" href="http://viewer.zmags.com/publication/765cdb28?page=67"> Outcomes and Solutions The expression ‘solutio</a> <a title="Global themes in asset management 2015 page 68" href="http://viewer.zmags.com/publication/765cdb28?page=68"> McKinsey & Company‘s 2013 report ‘Outcomes Are Th</a> <a title="Global themes in asset management 2015 page 69" href="http://viewer.zmags.com/publication/765cdb28?page=69"> This, along with investors taking a more global p</a> <a title="Global themes in asset management 2015 page 70" href="http://viewer.zmags.com/publication/765cdb28?page=70"> Need to change for DC schemes BNY Mellon and Cass</a> <a title="Global themes in asset management 2015 page 71" href="http://viewer.zmags.com/publication/765cdb28?page=71"> They explore “real assets” as one way to help div</a> <a title="Global themes in asset management 2015 page 72" href="http://viewer.zmags.com/publication/765cdb28?page=72"> Retail investors are also bewildered. They are lo</a> <a title="Global themes in asset management 2015 page 73" href="http://viewer.zmags.com/publication/765cdb28?page=73"> In conclusion Since the global financial crisis in</a> <a title="Global themes in asset management 2015 page 74" href="http://viewer.zmags.com/publication/765cdb28?page=74"> Sources McKinsey & Co: “The Asset Management Ind</a> <a title="Global themes in asset management 2015 page 75" href="http://viewer.zmags.com/publication/765cdb28?page=75"> Risk Risk is one of those slippery, undefinable</a> <a title="Global themes in asset management 2015 page 76" href="http://viewer.zmags.com/publication/765cdb28?page=76"> Some context It can be tempting to dive into such</a> <a title="Global themes in asset management 2015 page 77" href="http://viewer.zmags.com/publication/765cdb28?page=77"> Aberdeen’s position on risk Risk is inherent to a</a> <a title="Global themes in asset management 2015 page 78" href="http://viewer.zmags.com/publication/765cdb28?page=78"> Risk is uncertainty And so armed with a little of</a> <a title="Global themes in asset management 2015 page 79" href="http://viewer.zmags.com/publication/765cdb28?page=79"> The great statistician Maurice Kendall once wrote</a> <a title="Global themes in asset management 2015 page 80" href="http://viewer.zmags.com/publication/765cdb28?page=80"> Much of the investment industry is unhealthily we</a> <a title="Global themes in asset management 2015 page 81" href="http://viewer.zmags.com/publication/765cdb28?page=81"> </a> <a title="Global themes in asset management 2015 page 82" href="http://viewer.zmags.com/publication/765cdb28?page=82"> Regulators view risk differently than investors d</a> <a title="Global themes in asset management 2015 page 83" href="http://viewer.zmags.com/publication/765cdb28?page=83"> Sources: Peter L. Bernstein, “Against the Gods: T</a> <a title="Global themes in asset management 2015 page 84" href="http://viewer.zmags.com/publication/765cdb28?page=84"> Page index A Active management.................</a> <a title="Global themes in asset management 2015 page 85" href="http://viewer.zmags.com/publication/765cdb28?page=85"> I IMA............................................</a> <a title="Global themes in asset management 2015 page 86" href="http://viewer.zmags.com/publication/765cdb28?page=86"> Your wee notes </a> <a title="Global themes in asset management 2015 page 87" href="http://viewer.zmags.com/publication/765cdb28?page=87"> Your wee notes </a> <a title="Global themes in asset management 2015 page 88" href="http://viewer.zmags.com/publication/765cdb28?page=88"> Aberdeen Asset Management Bow Bells House 1 Bread</a>