Strategic/Smart Beta in Investing

1. beta is a measure of a security's or portfolio's volatility in comparison to the stock market as a whole.

2. "beta" is also used as shorthand to describe getting broad stock-market exposure, typically through investments that often track the S&P 500 and other major indexes.

3. Smart beta strategies occupy a middle ground between passive and active investment approaches. Smart beta funds are similar to passive index funds in their use of a systematic, rules-based framework to create portfolios. Smart beta strategies deviate from traditional index funds by emphasizing factors that may enhance returns relative to capitalization-weighted indexes.

Passive Investing for Asset Management

1. A passive fund is composed to track its benchmark (for example a large-cap fund might be benchmarked against the S&P 500 index) without making any deviations or analytical bets. 

2. mutual fund industry seems to have realized that they face an existential threat not just to their growth but to their very existence, and many of them are responding by cutting fees and offering passive investment choices.

Active Fund Managers In a Negative market

1. Index funds will tend to underperform active managers in strongly positive and strongly negative markets.

2. The argument is based on the premise that active managers can position their portfolios to benefit from the prevailing conditions.

[Misconduct] FCA Probes Risk of Fund Manager Failures

1. In April The Financial Conduct Authority investigated how the financial system would cope in the event of a fund manager failure. 

2. The regulator is concerned that a 'disorderly failure' of investment managers and/or their portfolios could disrupt the financial system.

3. The regulator examined the design of investment products, probing investment managers' oversight of investors' portfolio oversight and questioning some of the motives behind the launch of new funds.

Correlations and Diversification Benefit

1. When a company writes risks across a number of classes, it seems reasonable to anticipate that the values assessed to give a 75% likelihood of sufficiency for each class

2. The reduction from this sum to arrive at the amount assessed to have a 75% chance of covering the company’s total Insurance Liabilities is called the diversification benefit.

3.  Correlation, between how the amount ultimately paid compares to the central estimate for different classes can arise in two categories (Direct and Indirect correlation)

Selecting Tail Factors for Actuarial Valuation

1. The selection of the loss development tail factor is extremely important because it affects estimates for all accident years.

2. A minor adjustment to the tail factor can have a significant impact on the unpaid claim liability.

3. We will demonstrate the selection of tail factors that consider three key variables: retention, location, and industry.

4. We will use examples of triangles at several different retentions for countrywide losses and state-specific losses.

Understanding Trade Credit Insurance

1. In April 2017, The Actuary reported trade credit insurers paid £210m to businesses last year due to non-payment claims, the equivalent of over £4m a week.

Malaysia's 2017 FDI Outlook

1. Malaysia's economy is performing well in the region in terms of efficiency and business regulations despite modest GDP growth of 4.1 percent in 2016 (below the ASEAN average of 4.5 percent).

2. Malaysia is a net recipient of FDI, which accounts for the majority of inflows into the economy. Inward FDI is projected to have grown by 40 percent year-on-year in 2016 to reach MYR 50 billion, with the 2015 total (MYR 36 billion) having been surpassed by the end of September. Manufacturing accounted for the majority (51.2 percent) of investment, followed closely by services (47 percent). Primary industries received the final 1.8 percent.

Hedge Funds - Part 2 - Process and Policies Due Diligence

1. Hedge funds trade securities in volumes that are a multiple of their traditional asset management counterparts. In addition, hedge funds have less regulatory oversight than traditional asset managers.

2. A sound operational due diligence (“ODD”) process can serve as an effective mechanism to mitigate the risk of investing in hedge fund frauds. 

3. Here are some detailed insights and recommendations pertaining to Due Diligence practices on hedge fund managers focusing on their policies and process.

Hedge Funds - Part 1 - Basic Risks and Due Diligence

1. Hedge funds are unregulated investment pools. They generally are more nimble and dynamic in their trading strategies than other investment funds.

2. Hedge funds are successful only if they make money in both up and down markets. To do this, they employ some creative and risky investment strategies—selling short, using leverage, trading put and call options, trading futures and investing in emerging markets. 

3. Here is some information about hedge funds and their risks CPAs can use to evaluate the suitability of this investment for their clients.

Solar Energy Global Demand and Value in the Supply Chain

1.  Malaysia is ranked number three in the world in the solar manufacturing industry with China at number one and Taiwan in second place.

2. In 2015, 48 solar projects had been implemented with total investments of RM28 billion to produce solar wafers, cells, modules and system components subsequently in 2016 Mida attracted seven solar manufacturing projects and 83 renewable energy projects in the solar industry worth RM1.77 billion and RM650 million.

Asset Liability Mismatch and Management

ASSET LIABILITY MISMATCH IN BANKS SYSTEM

1. Mismatch occurs when the tenure of maturing loans do not match the tenure of the sources of funds on the liabilities side. The liabilities side of the balance sheet of a bank includes sources of funds and for a bank one of the main sources of funds are the deposits.

2. From 2010 onwards with the economy recovered, disbursements of infrastructure loans were sanctioned by banks to projects such as power and roads had duration between 10 and 15 years. However, deposit tenures were getting shorter and this huge disparity in tenures between assets and liabilities created the instability in banks’ balance sheets.

3. Countries pegging interest on deposits to market-determined rates has resulted in a fall in the rates and deposits are now of shorter tenure. With the de-regulation of interest rates, most depositors are not looking beyond one or two years. 

4. Constant monitoring and periodic evaluation of its investment portfolio is important for a bank as many of its short-term liabilities are met through this resource.

World Manufacturing Risk Index and Pioneer Index Report

1. A Manufacturing Risk Index assesses the, economic, technological and environmental risks in site selection for new manufacturing facilities.

2. A report by Cushman & Wakefield (C&W), ontains an Established Index, which ranks the 30  largest countries by manufacturing output, and a Pioneering Index, which measures the attractiveness of growing but less mature markets.

3. The highest rankings are described as “the scenario of a highly automated manufacturer” and the factors and weightage are as follow:

(i) Conditions - including labor force, logistics, and business environment are weighted at 40 percent.

(ii) Risks - including natural disasters,  economics and energy, are weighted at 20 percent.

(iii) Costs - including labor, construction and  electricity, are also weighted at 20 percent.

4. The rankings also factor in alternative  scenarios, such as manufacturers driven by low  operating costs, which weighs conditions and risks at 20 percent and costs at 60 percent.

[Framework] IFRS 17 Insurance Contracts - Part 3 - PAA on liability for remaining coverage

1. The Premium Allocation Approach (PAA) is a simplification of the Building Block Approach (BBA) to measuring insurance contract assets and liabilities. The IASB developed the PAA as an approximation during the coverage period for a short duration contract.

2. It is an optional measurement approach for contracts of short duration under IFRS 17, prior to and during the exposure period of the contracts. 

3. This post focus on the liability before the occurrence of an insured event (liability for remaining coverage). There is no contractual service margin under the liability for incurred claims as by definition the contractual service margin is amortized over the coverage period of the contract.

4. The liability for incurred claims is measured using risk-adjusted expected present value of fulfilment cash flows.

[Framework] IFRS 17 Insurance Contracts - Part 2 - Remeasuring, Presentation and Impact

1. Remeasuring after subsequent period.

2. Presentation in Financial Statement

3. Impact on Insurers (Life and General)

[Framework] IFRS 17 Insurance Contracts - Part 1 - Summary and Features

1. IFRS 17: Insurance Contracts will take effect on 1 January 2021.  

2. The new standard will replace interim standard IFRS 4: Phase I for entities to continue with their current diverse practices of reporting insurance contracts. 

[Misconduct] Deutsche Bank Fined £163 Million and $7.2 Billion for 2 Serious Failings

1. Deutsche Bank reaches a $7.2 billion settlement over US mortgage-backed securities

2. Deutsche Bank Fined £163 million by FCA for Anti-Money Laundering Failings.

ASEAN Manufacturing - Part 3 - Malaysia's Potential Industry

1. Although the weak ringgit has made Malaysia an inexpensive market for foreign investors, the country remained a resilient economy despite having been affected by global financial volatilities. Oil and gas, biotechnology and electrical and electronics are among the sectors on a list of National Key Economic Areas.

2. The government has singled out chemicals, E&E and machinery and equipment under the 11MP to drive the manufacturing sector’s transition to high-value, high-technology production. Along with these industries, other industries such medical devices and aerospace have been identified as segments with potential for substantial levels of growth. 11MP targets the manufacturing sector to grow at 5.1% per annum and contribute 22.5% to GDP, as well as 18.2% of total employment by 2020.

ASEAN Manufacturing - Part 2 - Key Sectors Review and Changing Trends

1. Businesses must understand the changing landscape and how it could affect their decisions on the location of manufacturing plants and could use a new methodology for making better decisions about plant location in the region.

2. ASEAN countries account for about 5 percent (McKinsey Global Institute) of global manufacturing (in value added terms) with dominant shares in sub-sectors such as chemicals, food and beverage, metals, and motor vehicles with new trends shaping these sectors.

ASEAN Manufacturing - Part 1 - Overview & US Manufacturing Outlook

1. A brief overview of recent developments that have influenced investors to build and expand operations in the region as foreign investors are diverting their attention towards ASEAN.

2. And also an overview on the growth forecast  in the U.S. economy as well as its manufacturing sector and subsectors.