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Why do the biggest companies disappoint on governance?

Tesco’s high profile failure reveals the interaction between incentives, failed strategy and governance. Unfortunately, despite hiring what should be the best non-executives, the record shows the biggest companies have more governance blow-ups. What is it about the way that big businesses operate that makes them more accident-prone, not less? Even the investors lucky enough not […]

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Do central banks ever check their forecasting record?

The best analysts work with what they know, and minimise forecasting. Assessing a company’s strengths and the price paid for shares usually beats making projections. So why, when it comes to the economy, is this discipline set aside? The Bank of England has now worked with forward guidance for more than a year, with little […]

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Are legendary signals – Copper & VIX – still useful?

What should investors make now of the mixed signals that question the strength of global equity markets? The copper price and implied market volatility strike a strong emotional chord with many investors. There is widespread faith in the power of these indicators to signal danger. How should investors set this emotion alongside the facts of […]

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Deflation an unimagined world for investors

Experience drives what we recognise and forecast, but deflation is unfamiliar territory. Investors base analysis on what they know and understand; periods of stable or rising prices. But that is not the pattern now; Europe’s inflation outlook is steadily being revised down, but getting little attention. Even if the deflation risk is recognised, the problem […]

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Dealing commissions; do clients get value for their money?

In one key area of asset management, the UK regulator is aiming for global leadership. The Financial Conduct Authority has ambitions to drive the EU debate on dealing commissions, and establish London as an investor-focused low cost centre. The first step is its current consultation on dealing commissions, which should raise standards and give retail […]

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Who loses from IPO conflicts?

The process for initial public offerings is one of the most opaque areas of the market, and is ripe for reform. The current IPO boom mirrors the excesses of the tech bubble a decade ago. That resulted in fines and new rules – but it’s still not fixed. There is a clear public interest in […]

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Investors find it hard to escape Optimism Bias

Some biases are so pervasive that adjustment is hard; optimism is such a deep rooted aspect of investor psychology that its impact is usually missed. A recent book, Fish Can’t See Water, describes the way in which an aspect of the environment or culture is embedded so widely that it becomes invisible. Yet, though never […]

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Smart beta investing and the seduction of labels

Smart beta is an impressive investment branding story. The name neatly encapsulates the idea of beating conventional indices consistently, but with little effort and much lower costs. Intellectually seductive, it conveys the concept of market exposure that avoids the costs and behavioural failures of active managers. And simultaneously it gives the impression of an edge […]

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Splitting major universal banks makes sense; safer & more valuable

Banks are proving a tough match for regulators, pushing back strongly against more controls and higher capital ratios. They have argued that imposing rules which increase capital could hit recovery, and politicians are particularly sensitive to this.But banks’ very success in fighting against strong capital ratios – suggesting that restoring capital should take years – […]

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Investors should question company stories

Company reporting in the UK is set to change, with new regulations coming in from September 30. The aim is a simpler, clearer and more focused presentation. Investors should also get a strategic report instead of the current business review. But, are these new rules on narrative reporting too little, too late? Recent reporting from […]

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