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Winter Charts: Big Data to the Rescue

“Winter Charts” is a series of current financial topics explained in dots, lines, and only a few words –just the right “mix” to concisely convey ideas for critical thinking about investing.

With domestic markets “grinding” from one high to another, investors are beginning to question if there are “enough” positive returns left for equity risk being taken. Per our previously stated concern that past economic data as well as analytical tools are not reliable guides for assessing the “health” of a given opportunity set in a mainly policy-driven market (see our recent post, Work, Work, Work, Work, Work), we like to take advantage of utilizing big data in understanding how “the street” is positioned.

Contrary to investors who may have been concerned with index levels and (to a degree) valuations for the past few years, the professional “crowd” of mutual fund managers has largely not shared the same outlook – at least not until more recently. In fact, until about mid-2015, professional managers were deploying cash, drawing aggregate cash levels to the lowest point observed over the past 20 years, and the market corresponded respectively. However, this previously observed trend has generally been in reverse ever since, and a paradigm shift may be ahead of us.

The bottom line: Instead of only relying on traditional data sets, investors may monitor fund flows as an additional point to inform allocation decisions. It is important to watch what investment managers do, and not only what they say. While certainly not a perfect indicator, using an element of mosaic theory may help investors make difficult decisions or alleviate fears.


Matthias Paul Kuhlmey is a partner and head of Global Investment Solutions (GIS) at HighTower Advisors. He serves as wealth manager to high net worth and ultra high net worth individuals, family offices and institutions.

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