Paul Volcker on the causes of the recent financial crisis:
It should be clear that among the causes of the recent financial crisis was an unjustified faith in rational expectations, market efficiencies, and the techniques of modern finance. That faith was stoked in part by the huge financial rewards that enabled the extremes of borrowing, the economic imbalances, and the pretenses and assurances of the credit-rating agencies to persist so long. A relaxed approach by regulators and legislators reflected the new financial zeitgeist.
All the seeming mathematical precision that was brought to investment, all the complicated new products, including the explosion of derivatives, that were intended to diffuse and minimize risk, did not work as had been claimed.
The whole article is worth the read, written by a very thoughtful man who essentially makes a call to action to governments and central banks around the world to make structural changes to the global financial system. However, his observations also serve as a valuable warning to every investor who seeks investment strategies that promise precise risk and return profiles in all kinds of markets based on elegant financial theories (i.e. optimization).
Tactical Asset Allocation, in contrast, has a simple mandate: Seek out the strongest trends from a given investment universe. Tactical Asset Allocation seeks to capitalize on secular bull and bear markets in asset classes, but it makes no bones about the fact that it isn’t a painless process.
Click here to view a video on our Global Macro portfolio, one of our Global Tactical Asset Allocation strategies.
To receive the brochure for our Global Macro strategy, click here. For information about the Arrow DWA Tactical Fund (DWTFX), click here.
Click here and here for disclosures. Past performance is no guarantee of future returns.
