There are only about half a dozen blogs in the world that those with a serious interest in investing need to follow. One of them is Tadas Viskanta’s Abnormal Returns. For me, Tadas is the best curator of quality investing content on the web. In this brief Q&A interview, he talks about his blog, hedge funds and smart beta. He also summarises what he’s learned from many years spent working in, and writing about, the financial industry.
You call your blog “forecast-free”. Why is that?
“Forecast-free” is a moniker I came up with on day one of the blog. It was a reaction to what I was seeing in the then-nascent investment blogosphere. In my mind it was filled with predictions, forecasts and stock picks. I wanted to do something completely different.
In the blogosphere there has definitely been a move away from the “stock pick of the day” type of blogging. The financial crisis did a lot to clean out all but the most dedicated bloggers. Those remaining today are more likely focused on long-term, strategic advice. That isn’t to say there still isn’t a stream of bloggers who want to use their blog as a platform to become the next big name.
You’re fortunate in the US to have a number of very good investing blogs to choose from. Do you have any particular favourites?
You see my favourite investment blogs on display every day on Abnormal Returns. The sad fact is that it is deceptively easy to start a blog but incredibly difficult to keep it going. Therefore the content on my blog is always in flux.
A big problem in the UK is the amount of financial journalism that’s clearly conflicted. Do you find that in the US too?
Like you I get a steady stream of unsolicited PR pitches from companies and individuals. That being said I don’t know if financial journalism is any more conflicted today than it has been at any other time. A quick glance through a daily newspaper or mainstream investment site will show you that fund companies and brokers still are the biggest advertisers out there.
You personally seem to be fairly agnostic about investing and the best way to do it. What is your investment philosophy? And how has it changed over time?
I think investors need to have as a null hypothesis a simple, low-cost globally diversified portfolio. To shift away from this in some form or fashion should require a really good argument. That isn’t to say there aren’t opportunities to potentially add value to a portfolio but they all require either higher expenses or additional tracking error. The big way in which my investment philosophy has changed over time is simply to “do less.” Humility is a good way to approach life, but all the more so in the case of investing.
You used to work in the hedge fund industry. Hedge funds are having a tough time at the moment — and plenty of bad press from the likes of me! Is there still a place for them?
There will always be a place for hedge funds. At their best they represent an entrepreneurial approach to investing. Hedge funds on the margin set prices today and by and large that is a good thing. That being said, today’s hedge fund industry is more focused on asset accumulation than asset returns.
It’s a completely different animal from the hedge fund industry of the 1980s or 1990s. There are more funds with more assets falling over each other to try and generate alpha. That is why it is disingenuous to point to hedge fund index returns from those times to argue for a hedge fund allocation today.
A major talking-point in the media and the blogosphere this year has been so-called smart beta. Is smart beta just marketing hype? Or is it more substantial than that?
Like most things in life it is both. There are good arguments to be made that cap-weighted indices are in a sense inefficient. Therefore different weighting schemes can provide better risk-adjusted returns. That said, the smart beta bucket is filling up with all manner of strategies and schemes. It’s going to be increasingly difficult for investors to distinguish between them.
Finally, if you could give investors just one piece of advice, what would it be?
Do less. You are not as smart as you think you are.