Five Things to Do Before December 31st
We're just a few short days away from 2017!!!
I don't know about you, but I'm ready for 2016 to wrap up and to BRING IT ON for 2017. My guess is you are ready to, too.
But before you countdown and clink glasses at 12:00am January 1, 2017 to celebrate the new year, here are five things to do before first. They won't take long, and they are simple ways to not only look back at this year but to get your head and your heart ready for the next.
1. Writing exercise: What did I learn?
When you think about 2016, what did you learn about yourself? Your career? Your habits? Your relationships? Your finances? Your health? Make a list of all the learnings you had. Let your mind go and just jot down anything that comes to mind. I bet it's more than you realize! Once you write it down, reflect back to what happened to lead to this learning. What got you to that point? What did you learn about yourself, where you are right now in life, that you didn't know before? It's important to pinpoint the specifics, because this awareness will help you on your journey forward.
2. Say thank you.
Think about this past year and everyone who helped you along the way, or just did something nice for you. Maybe you have a colleague who always treated you to coffee (like I had!) or perhaps a friend was there for you during a difficult time, and really listened. Whatever or whoever it was, think about how you can thank them. A simple handwritten note or card goes a long way, especially this day and age when everyone is glued to their phone! Whenever I receive a card or handwritten note, I am always so nicely surprised. Make a list of who needs to be thanked, buy some notecards, and get writing!
3. Say goodbye...
To things and people who don't make you happy or add to your life in some way - and vice-versa. If you can't say goodbye, think about creating a healthy distance from them. Life is too short to be in bad company, in a negative place, or with habits that only hurt you or others. Plus, the more these negative people, influences, or habits take up space in your life, the less space you have for the better, positive things and people that will bring your more joy and happiness. Our lives can only hold room for so much, so really consider what's being held in yours.
4. Get excited! And write it down!
The new year is around the corner. New opportunities. New goals. New adventures. Allow yourself to drift into a happy place thinking about all the awesomeness this new year may bring. Maybe it will bring a new relationship, a new direction in your career, or newfound courage to go after something you've been thinking about. Once you get excited, allow your mindset to shift into this positive place. Write down your "What I want in 2017" list and don't hold back. As you can see, I'm a firm believer in writing things down! Last year I wrote down that I wanted to become a Huffington Post writer, and just a few weeks into 2016 I did it!
5. Decide your priorities and goals for the new year.
So maybe you want to drop 10 lbs., go on three dates a week, and get promoted by March. It's great to have goals, but make sure they are realistic and won't drive you further from them before you get in the groove. The best way to achieve your goals is by taking small, measurable steps. Typically, when we try to do it all, or take too big of a step, we end up getting not very far. Decide what your top priorities are. Write them down, and then decide what action items you will take and when you will take them, to help you get there. Consider enlisting in support - like a friend, coworker, therapist or coach - depending on your specific goals. Remember that success is never really done on one’s own, and it is totally, 100% OK to ask for help!
Alright, now that you have those five quick tips - go for it!
Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds
Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies, J.P. Morgan Asset Management
A quiet revolution is taking place in the alternatives world. The idea of alpha/beta separation has finally made its way from traditional to alternative investing. This development brings with it a more transparent, liquid and cost-effective approach to accessing the “alternative beta” component of hedge fund return and a new means for benchmarking hedge fund managers.
The good news for investors is that the separation of hedge fund return into its components—rules-based alternative beta and active manager alpha—has the potential to shift investing as we know it. These advancements could democratize hedge funds and, at long last, make what are essentially hedge fund strategies available to all investors—even those who aren’t willing to hand over the hefty fees often associated with hedge fund investing.
A benchmark for alternatives
With respect to traditional equity investing, we have long accepted the idea that there is a market return, or beta—but this hasn’t always been the case. Investors used to assume that to make money in the stock markets, one needed to buy the right stocks and avoid the wrong ones. The idea of a market return independent of skilled stock selection seemed ridiculous to most market participants. Yet today, we would never invest in an active manager’s strategy without benchmarking it against its respective beta.
Interestingly, hedge fund managers have been held to a different standard. Investors have been much more willing to accept the notion that hedge fund strategy returns are pure alpha, and that their investment returns are based entirely on the skill of the fund manager. That notion explains why investors have been willing to accept a “two and twenty” fee structure just to access what has been perceived as one of the most sophisticated and powerful investment vehicles available.
In thinking about the concept of beta, consider its precise definition—the return achievable by taking on a systematic exposure to an economically compensated risk. In traditional long only equity investing, the traditional market beta has been further refined as a number of other risks have been identified that are commonly referred to as “strategic beta.” These include factors such as value, momentum, quality and size. But no one ever said that these risk factors must be long-only.
Over the past decade, as more hedge fund data became available, academics began to disaggregate hedge fund return into two components: compensation for a systematic exposure to a long/short type of risk (alternative beta), and an unexplained “manager alpha.” What they found is that a significant portion of hedge fund return can be attributed to alternative beta. That fact has turned the tables on how we look at hedge fund return. With the introduction of the alternative beta concept, hedge fund managers will have to state their results, not just in terms of total return, but also as excess return over an alternative beta benchmark.
Merger arbitrage—an alternative beta example
The merger arbitrage hedge fund style can be used to illustrate the alternative beta concept. In the case of merger arbitrage, the beta strategy would be the systematic process of going long every target company, while shorting its acquirer. There is an inherent return to this strategy because the target stock price typically does not immediately rise to the offer price upon the deal’s announcement. This creates an opportunity to purchase the stock at a discount prior to the deal’s completion. The premium that remains is compensation to the investor for bearing the risk that the deal may fail.
Active merger arbitrage managers can add value by choosing to invest in some deals while avoiding others. Therefore, their benchmark should be the “enter every deal” strategy, not cash. In fact, the beta strategy explains the majority of the return to the average merger arbitrage hedge fund. And it doesn’t stop there. Other hedge fund styles that can be explained using alternative beta include equity long/short, global macro, and event driven. Note that the beta strategy invests in the same securities, using the same long/short techniques as the hedge fund strategy. The difference is that the beta strategy is a rules-based version that can become the benchmark for the hedge fund strategy. After all, if a hedge fund strategy cannot beat its respective rules-based benchmark (net of fees), an investor may be wiser to stick to the beta strategy.
Implications for investors
What does all this mean for the end investor? Hedge funds have traditionally been the domain of sophisticated investors willing to pay high fees and sacrifice liquidity. Alpha/beta separation in the hedge fund world means that investors can finally choose whether to buy the active version of the hedge fund strategy or opt for the passive (beta) version. Hedge fund strategies can be effective portfolio diversifiers. Now, through alternative beta, virtually all investors can access what are essentially hedge fund strategies in a low cost, liquid, and fully transparent form. For investors who haven’t had prior access to hedge funds, this could be welcome news. Not only can investors look at an active hedge fund manager’s strategy and determine how it has done compared to the systematic beta equivalent, they can also invest in ETFs that encapsulate these systematic strategies.
When looking at one’s traditional balanced portfolio today, there are plenty of questions around whether the fixed income portion will achieve the same level of diversification it has provided in the past. After all, with yields still low, there is little income return. Additionally, the capital gains that came from interest rate declines are likely to reverse. With fixed income unlikely to adequately fulfill its traditional role in portfolios, there is a need to find an alternative source of diversification. This is where alternative strategies may help. For investors seeking to access diversifying strategies in liquid and low-cost vehicles, alternative beta strategies in ETF form are one option.
Looking for an alternative to enhance diversification in your portfolio?
For investors looking to further diversify their overall portfolio, JPMorgan Diversified Alternatives ETF (JPHF) seeks to increase diversification and reduce overall portfolio volatility through direct, diversified exposure to hedge fund strategies using a bottom-up, rules-based approach.
Learn more about JPHF and J.P. Morgan’s suite of ETFs here.
Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.
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