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emlyn ngwiri		#11 Posted : Friday, December 16, 2011 7:57:01 AM
Rank: Member Joined: 8/12/2010 Posts: 129 Location: nairobi		how would one vary the percentage holding in a given stock? (passively) rgds
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GGK		#12 Posted : Friday, December 16, 2011 8:33:25 AM
Rank: Member Joined: 11/21/2006 Posts: 608 Location: Ruiru		This is one of those threads that I can't contribute. But it is enlightening all the same. "..I am because we are. "― Ubuntu, Umtu,
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Scooby		#13 Posted : Monday, December 19, 2011 9:34:31 PM
Rank: Member Joined: 9/2/2006 Posts: 121		Emlyn, The decision to vary the percentage holding (what am referring to as tolerance limit) is to some extent, influenced by an investor’s risk appetite. Let me try to expain with the following fictional examples... A young investor who has recently left campus, and is employed, is likely to desire a wider tolerance limit as s/he believes that the value of their portfolio will increase in the long term. In addition, the investor will recover the losses from future employment income. In contrast, another investor who has kids in school would have a lower tolerance limit as they do not want to loose a lot of their investments bearing in mind their parental obligations. They also don’t have a “longer” time to work hence would want to save as much as they can. Hope this helps. Regards
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emlyn ngwiri		#14 Posted : Tuesday, December 20, 2011 7:44:46 AM
Rank: Member Joined: 8/12/2010 Posts: 129 Location: nairobi		Thanks scooby. do we have an active or passive bond market index in kenya (running)?
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Scooby		#15 Posted : Tuesday, December 20, 2011 10:39:13 PM
Rank: Member Joined: 9/2/2006 Posts: 121		Emlyn, We dont have a passive market in Kenya. Am yet to see our so called investment banks introducing an index fund that contains all the shares in NSE 20 Share Index or NSE All Share Index. Also, we could also have sub indices based on a particular sector. That way, one can be able to easily judge if an investor made returns based on their skill and knowledge or while riding the wave. I can say we do have some form of an active market. What am seeing in the market is that fund managers are determining the "index return" and comparing their performance against it. The index return is simply equal to (ending index value less beginning index value)/ beginning index value. Ideally, the starting point for any active manager is an index fund. We can then find out, to what extent, their performance is attributed to the return on index and the other on their skill and knowledge in generating alpha (i.e. returns over an above the index return). Regards
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Scubidu		#16 Posted : Wednesday, December 21, 2011 8:45:50 AM
Rank: Veteran Joined: 9/4/2009 Posts: 700 Location: Nairobi		Scooby wrote: Emlyn, We dont have a passive market in Kenya. Am yet to see our so called investment banks introducing an index fund that contains all the shares in NSE 20 Share Index or NSE All Share Index. Also, we could also have sub indices based on a particular sector. That way, one can be able to easily judge if an investor made returns based on their skill and knowledge or while riding the wave. I can say we do have some form of an active market. What am seeing in the market is that fund managers are determining the "index return" and comparing their performance against it. The index return is simply equal to (ending index value less beginning index value)/ beginning index value. Ideally, the starting point for any active manager is an index fund. We can then find out, to what extent, their performance is attributed to the return on index and the other on their skill and knowledge in generating alpha (i.e. returns over an above the index return). Regards @scooby. I have seen AA track the bond market by looking at changes in clean price. They've taken clean prices based on the NSE yield curve and weighted them based their respective liquidity. Off course they only look at what is tradable over the NSE (excluding those bonds whose prices can't be determined through the NSE). According to AA the Kenyan bond mart is priced at 89% of face value. What do you think? “We are the middle children of history man, no purpose or place. We have no great war, no great depression. Our great war is a spiritual war, our great depression is our lives!" – Tyler Durden
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emlyn ngwiri		#17 Posted : Thursday, December 22, 2011 5:14:23 PM
Rank: Member Joined: 8/12/2010 Posts: 129 Location: nairobi		@ scooby i thought a regular "buy and hold" is passive and thats what Old mutual do in one of their product offerings money market fund? @ scubidu would investing in the fixed for floating rate cfc bond be pegged on the regular T/bill? (FIXED ELEMENT ONLY) and the tracking risk would average out depending on the high t/bill or t/bond returns being offered?.
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Scooby		#18 Posted : Thursday, December 22, 2011 7:42:26 PM
Rank: Member Joined: 9/2/2006 Posts: 121		Hi Scubidu, My interpretation of what you are asking is whether AA’s assertion that the market prices of the bonds are understated is true. That being the case, there are two things that we can consider. Firstly, the value of bonds in Kenya is largely attributed to the level of government borrowing and the consistent election cycle like the current pre election jitters. So, how comfortable are they that the clean prices for tradeable securities are purely driven by market forces? I remember that we were talking, a while ago, about the HF bond that has an interest rate of 8.5% for the fixed rate portion. If you look at today's bond pricelist (i.e. 22 December 2011), the last clean price for that bond was 100 implying the yield for this bond is 8.5%. In contrast, the latest NSE yield curve (as of 16 December 2011) indicates that the yield for a six year bond is 14.376%. So the “market price” for the fixed portion of the HF bond should far much lower than 100. Secondly, I'll be curious as to how they derive their yield curve i.e. do the use on the run (recently issued), off the run (old issues) or a mixture of both. Tell me if they do have yields for, say, six or seven years. Let me know what your views are on what I have mentioned. Regards
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Scooby		#19 Posted : Thursday, December 22, 2011 7:59:32 PM
Rank: Member Joined: 9/2/2006 Posts: 121		[quote=emlyn ngwiri]@ scooby i thought a regular "buy and hold" is passive and thats what Old mutual do in one of their product offerings money market fund? Emlyn, My understanding of "buy and hold" is that it is one of the investment strategies, they others being AFS and HTM. It could also be a passive strategy as you allude to if we can confirm that Old Mutual is holding the same investments as a particular reference benchmark (am yet to know of any public benchmarks in Kenya) and it has not deviated from that benchmark over time. Regards
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emlyn ngwiri		#20 Posted : Friday, December 23, 2011 7:55:43 AM
Rank: Member Joined: 8/12/2010 Posts: 129 Location: nairobi		@scooby passive strategies are designed to make a return that does not beat the market. so buy and hold strategies are clinically designed for that purpose (for both bonds and equities). aren't they?
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