1、TEXT . IntroductionThere is a subtle but pervasive revolution going on in the theory and practice of investmenta revolution in the most fundamental assumptions with which investors frame their notions of their investment assets. The old regime of security analysis emphasized individual assets, but o
2、ver the last quarter century it has been gradually replaced by a new regime of portfolio management, with corresponding emphasis on composite assets. The new emphasis on composite assets is as revolutionary in relation to traditional investment perspectives as an Apollo astronauts photograph of the
3、whole Earth rising above the Sea of Tranquility is to a map of the New York City subway system.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,By “composite assets” I mean diversified investment aggregates, such as portfolios of stocks or bonds, that are themselves made up of indiv
4、idual assets, but are nonetheless thought of globally, as indivisible units. The composite asset perspective operates on the macrocosmic, whole-portfolio level, relegating individual assets to the role of mere building blocks. Investment Strategies with Composite AssetsAs of this writing, approximat
5、ely $200 billion is invested on behalf of Americas largest and most sophisticated corporate and public pension plans and endowments in various equity and fixed-income index funds. The phenomenal growth of index funds is only partially attributable to frustration with traditional active management. P
6、erhaps it is just as well explained by a preference for systematic diversification, rigid investment discipline and tight cost control made possible by a perspective that treats the benchmark index as a single composite asset.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,The impa
7、ct of these enormous funds, and the attitude that has made them so popular, can be seen when a new stock is added to Standard and Poors 500, the most widely followed benchmark index. In the weeks following addition, new stocks can be observed to appreciably outperform the market, reflecting not only
8、 buying pressure from index funds but also the enhancement of the stocks credibility and prestige resulting from membership in this exclusive composite asset club.Many index funds now seek not simply to mimic or reproduce published indexes but instead to offer what amount to competing alternative co
9、mposite assets. Some such funds offer biases, or “tilts,” in index composition or weighting in favor of particular investment attributes, such as yield or size, while still maintaining diversification and broad market exposure. Others use quantitative models to select securities thought to be underp
10、riced, combining them into portfolios designed to track, yet still outperform, a published index. In both cases investors are still pursuing the holy grail of better-than-market performance, but they are doing so in a new composite asset framework.,Unit Nineteen The Revolution in Composite Assets Do
11、nald L.Luskin,Asset allocation strategies are born not only of the recognition that it is difficult or impossible to beat the market through stock selection but also of the belief that such a pursuit is essentially trivial. Allocation decisions between broad investment classesthat is, composite asse
12、tsare now understood to be the prime contributor to risks and returns. On the strategic level pension plans now typically retain specialized consultants to help structure asset allocation to meet long-term obligations while maximizing expected return. On the tactical level investment managers recomm
13、end short-term shifts between composite assets in response to models of the relative risk-adjusted attractiveness of asset classes.Stock index futures are arguably the most successful new products in the history of the securities industry, trading a daily value far in excess of the underlying stock
14、market. They are used by institutions as generic proxies for composite assetsunits for transferring systematic risk in all manner of hedging, positioning and restructuring activities at the whole-portfolio level. Arbitrage between index futures and their underlying physical indexes treats the stock
15、and futures exchanges as competing marketplaces for equivalent and interchangeable composite assets.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,. Trading in Terms of Composite AssetsUnfortunately, the futures market remains the closest current approximation to a composite asset
16、s exchange, leaving a gross mismatch between the way investors think about their investment goals and the way they must carry them out. For investors who customarily think in terms of composite assets, a preference to trade in the same composite terms flows inevitably from important functional requi
17、rements of their investment strategies. Transactions must be made proportionately and simultaneously across all the assets comprising a composite asset, yet institutions like the New York Stock Exchange and the over-the-counter network of government bond dealers still only trade individual assets, o
18、ne at a time.To redress this deficiency, the securities brokerage industry has improvised several ex officio exchange mechanisms of its own. In “package” trading a broker acts as an off-floor dealer/specialist to facilitate simultaneous trading of a list of assets. In equities it has been estimated
19、that package trading now accounts for upward of 25 percent of daily New York Stock Exchange volume.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,In the increasingly popular “crossing networks,” brokers provide a central computerized bulletin board facility on which investors may
20、confidentially post lists of assets to be traded. Executions are consummated when lists, or combinations of lists, are able to be paired off in the computer. Although these networks are still in their infancy, they have already begun to attract significant interest from investors; their trading volu
21、me is now reported in the millions of shares on many days.The revolution in composite assets has caught the New York Stock Exchange in an uncomfortable competitive position. On the one hand, in the wake of the October 1987 crash, the NYSE is seeking to strengthen its infrastructure to handle orders
22、motivated by composite asset strategies. Though it recently put in place rules to prohibit use of its computerized order entry systems for index futures arbitrage on days when the market experiences large price changes, at the same time, it would like to take a leadership role in the inevitable grow
23、th of trading of composite assets. For example, it has advocated the creation of a specialist post for trading entire standardized portfolios of stocks all at once.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,The revolution in composite assets will be complete when exchange mech
24、anisms allow investors to trade and clear composite assets entirely in composite terms. For instance, someday investors will be able to place an order to buy a $10 million composite asset comprising a specified number of individual assets, with a specified theoretical tracking error versus a specifi
25、ed index, and specified levels of biases toward specified economic and risk factors. Ultimately, clearing institutions may have to evolve to accommodate transfers of wealth in units subtler than share certificates.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,. Roots of the Compo
26、site Asset RevolutionLike most revolutions, the revolution in composite assets has been gradual, progressing inevitably out of a complex of economic, conceptual, regulatory, and technological factors. Most fundamentally, it was necessitated by the sweeping institutionalization of markets that has oc
27、curred over the last 25 years. The vast magnitude of institutional investment funds, and the complexities of accommodating their astonishing rate of growth, are grossly out of scale with the notion of traditional analysis of individual assets. Diversification of institutional holdings into composite
28、 assets is virtually automatic, and a matching conceptual framework is functionally unavoidable.Beyond this simple argument of necessity, there are a number of other, subtler reasons why institutional investors have come to prefer to think and act in terms of composite assets. First,Unit Nineteen Th
29、e Revolution in Composite Assets Donald L.Luskin,the regulatory environment has developed in ways that increasingly mandate it. For example, the Employee Retirement Income Security Act of 1974 (ERISA) judges the prudence of individual investment opportunities in their whole-portfolio context, explic
30、itly acknowledging the axiom that uncorrelated risky individual assets can be combined into less risky composite assets. Thus traditional investment decisions on the individual asset level take a back seat to considerations of how they will affect the overall composite assets of which they are but c
31、omponents. As another example, Financial Accounting Standards Board (FASB) Statement 87 is forcing corporations to account for the values of their pension plans as the surplus of assets over liabilities. FASB 87 mandates that the surplus itself be thought of as a single asset (or liability) owned by
32、 the corporation, a supercomposite asset perspective not only beyond individual assets but even beyond individual asset classes as well.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,Second, institutional investors have increasingly come to be measured by unforgiving standards of
33、performance, denominated by indexes that are themselves composite assets. There has even evolved a new consulting business in designing custom measurement indexes, called normals, geared to benchmarking particular management styles. When the measure of successand thus compensation, as wellis denomin
34、ated in composite terms, even traditional investors whose thinking is dominated by individual asset analysis are subtly induced to adopt the composite assets perspective.Third, institutional investors are drawn to perceived cost benefits of the composite asset perspective. Management fees for comput
35、er-driven composite asset strategies such as indexing are generally much lower than those for human-labor intensive strategies dependent on active individual asset analysis. And many believe that composite asset trading techniques such as,Unit Nineteen The Revolution in Composite Assets Donald L.Lus
36、kin,package trading reduce the explicit and implicit costs of transacting. Because a composite asset can be thought of as a single trade, much larger than any of its components taken individually, by packaging the transaction in a single conceptual unit the trader should be entitled to a quantity di
37、scount resulting in lower unit commissions. Potentially more significant, the percentage bid/offer spread is thought to be lower for relatively informationless composite assets than it would be for individual assets, because they are presumably less risky for the marketplace to facilitate.Whatever t
38、he economic or regulatory stimuli, the revolution in composite assets would not have been possible without the development of a constellation of new concepts and processes of quantitative analysis. As Graham and Dodds Security Analysis drew for a generation of investors a map of the world dominated
39、by individual assets, Markowitzs Portfolio Selection introduced a new generation to “Modern Portfolio Theory,” the language of composite assets. In the 25 years since Markowitzs theoretical work was first,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,published, his basic insights
40、have been extended to a complex of implementation-oriented tools that give portfolio managers the conceptual framework in which assets can be described, measured, and manipulated as composites.Modern Portfolio Theory (MPT) might have remained nothing more than an academic artifact had it not been fo
41、r the parallel development of inexpensive high-speed computers capable of putting MPTs insights at the practical disposal of portfolio managers. With the data-processing tools available 25 years ago, merely constructing a census index fund was a prohibitively laborious exercise. Todays microcomputer
42、s, on the other hand, have allowed MPT to be brought to a point of refinement in which huge portfolios can be constructed and optimized instantaneously, creating the capability to make and implement the most complex portfolio-level decisions in a microtiming framework appropriate even for day-tradin
43、g.,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,. AfterwordLike the mountaineer who scales the peak one step at a time, only to be startled when he looks back down his path and realizes just how high he has climbed, many observers are made uncomfortable by the revolution in compo
44、site assets. Have todays computer-driven, composite asset oriented investment processes somehow grown too far and too fast, forgetting that the individual assets that make them possible are the life blood of real corporations and governments?For some, the stock market crash of October 1987 was the l
45、ong-awaited proof that the composite assets revolution has spun out of control. The truth is exactly the opposite. Thinking and trading in composite assets has, in fact, given investors an unprecedented degree of control over their investments. It was this very control that allowed investors to effe
46、ct almost instantly a drastic negative revaluation of equities that, in the past, would have taken months to,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,accomplish. As technologies of all types, from the automobile to the telephone, have accelerated almost every aspect of contem
47、porary life, thinking and trading in terms of composite assets has similarly accelerated the investment process. If markets are, primarily, mechanisms for the expression of opinions in the form of prices, our society should endorse technologies that make such expressions more efficient and more free
48、.(from The Institutional Investor Focus on Investment Management),Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,Exercises . Translate the following into English, using the words or phrases in the text:,1.关于组合资产的一套新的理
49、论体系,2.引人瞩目的指数化证券投资基金的增长,3.能够反映来自指数基金的购买压力的新股票,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,4.能够降低单一资产风险的多样化投资,5.寻求最佳的资产投资策略,6.取得长期投资的最大回报,7.在证券经纪业中采用临时的交易机制,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,8. 纽约股票交易中心25%的日交易量,9. 进行组合资产方面的投资决策,10. 依赖于特殊的管理体系的公司的未来,11. 对风险资产的定量分析,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,12. 将重点放在组合资产而非单一资产上,13. 由于attributable to旧体制的失败而进行的组合资产改革,14. 远期投资战略的运用,15. 脱离spin out of控制的组合资产改革,Unit Nineteen The Revolution in Composite Assets Donald L.Luskin,
