About Ben McMillan

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So far Ben McMillan has created 14 blog entries.

2016 Year In Review

RQSI 2016 Year In Review Our annual Year In Review includes a Letter from the Manager (Mr. Ramsey), which blends several components, including a look back on our year, personal insights, market analysis and a look forward. A detailed Performance Analysis and Summary is also presented.  An overview of our GAA Systematic Global Macro Fund and our firm’s philosophic drivers, round out the publication.

The Goal of Asset Management: Objectives, Instruments & Misconceptions

First in a series of RQSI investment commentaries on asset allocation Over the last few years, the world has suffered a banking crisis; a violent collapse in housing, equity, and commodity markets; and the destruction of more than $12 trillion in wealth. Americans have lost trillions in home equity and are paying down debt (if they can afford to). U.S. consumers, supposedly one of the two primary engines of the global economy, appear tapped out. Millions of workers are unemployed, and the unemployment rate in the United States remains near 10% (and much higher if we include so-called discouraged [...]

Portfolio Construction: Volatility & Correlation

Second in a series of RQSI investment commentaries on asset allocation In our previous paper, we discussed the advantages of investing in a straightforward, diversified portfolio of equities, Treasury bonds, and commodities. We achieved this apparent diversification by allocating 40% of our investment capital to equities, 40% to government bonds, and 20% to commodities. So, for every $1.00 we invest, we put $0.40 in the S&P 500, $0.40 in U.S. 10-year Treasury notes, and $0.20 in the Reuters-Commodity Research Bureau (CRB) Index. However, we can make several crucial enhancements to this portfolio that would improve its risk-adjusted returns across most [...]

Portfolio Construction: Volatility & Correlation part 2

Third in a series of RQSI investment commentaries on asset allocation On the popular television program “Mad Money,” Jim Cramer, a former hedge fund manager and talking head, features a segment each Wednesday called “Am I Diversified?” Callers reveal the five largest positions in their (stock only) investment portfolios, and Cramer tells them whether their portfolio contains too much concentrated risk. On an episode we viewed recently, an investor whose portfolio included shares of Google, Goldman Sachs, Raytheon, Transocean, and Caterpillar was told his investments were well diversified. Yet over the past year, these stocks have demonstrated an average daily [...]

Intelligent Market Timing

Fourth in a series of RQSI investment commentaries on asset allocation In previous white papers, we have discussed ways to intelligently capture market betas by constructing a diversified basket of assets, never relying exclusively on any single return stream. In White Paper 3, we introduced the idea of using simple market-timing tools to enhance returns, thus further reducing our portfolio’s correlation to a static market return. The example we gave was of a simple moving average, probably the most basic technical trading tool available. Using this example, we discussed the following: if an asset’s price is below the long-term moving [...]

Bringing it all together

Last in a series of RQSI investment commentaries on asset allocation How should investors allocate their capital in an uncertain world? What approach to asset allocation makes the most sense, given markets with unstable correlation and volatility structures? How are we supposed to invest? Our goal in writing this series of white papers is to help our clients and colleagues answer these questions, and to provide straightforward tools for achieving their investment goals. In previous papers, we have explained that thoughtful asset management starts with an “objective.” We believe that The Objective for all rational investors is [...]

Bonds, Interest Rate Regimes & Trading Strategies

Bonds, Interest Rate Regimes & Trading Strategies The past 30 years have been an ideal environment for bond investors in developed countries, as interest rates have been in a secular downtrend (generating steady capital appreciation for bondholders) and the yield curve has generally remained upward sloping (generating consistent positive carry). Today’s multi-decade lows in interest rates have awakened the bond market vigilantes from their long sleep. For a few years now, talk of a “bond bubble” has been popular, and from all sides it seems we hear prognostications of the inevitable catastrophe that is coming for all bond investors when [...]

Macro|0 Comments

A Better Way to Capture Macro Economic Trends

A Better Way to Capture Macro Economic Trends There are many papers written on the randomness of price series and the lack of serial correlation in asset prices. We will not debate the obvious positive results of 40 years of CTA data which shows validity in the basic application of trend following techniques to futures trading. It is hard to refute that, even adjusting for survivor bias, one could have invested in a portfolio of trend following type strategies and produced a portfolio net return with a 0.5 to 0.7 Sharpe ratio and a return profile that is complimentary [...]

Macro|0 Comments

2015 Year In Review

Dear Friends, Looking back on 2015, it seems like we just lived two different years. The first half was the year of perfection. It was as if the markets were designed to fit our models. The second half of the year was a constant battle. All in all, it was a solid year with a net return of almost 5%. We would hope for a higher return, but given the implosion in commodity prices and the choppiness elsewhere, our models simply do not react to a higher frequency chop like we saw in many markets. From a broader perspective, the [...]

Small Cap Dividends Are Not Created Equal

SmallCap Dividends Are Not Created Equal Conventional wisdom has long held that dividends are a key tenet of investing.  Benjamin Graham, himself, was unwavering in his view that a company’s record of paying a dividend was perhaps the best signal of “quality.” As investors have increasingly begun to favor simplicity and quality, dividends have emerged as a simple solution to both.  We take a closer look at the practice of using dividends as the only investing criteria, particularly among small-cap companies, and risks and implications that arise as a result. Arguments in favor of a dividend-centric approach to investing generally center [...]

Equities|0 Comments