Lance Gunkel, CFP®, CFA, Managing Director
April 28, 2015
It was an enjoyable and informative first day at the CFA Annual Conference here in Frankfurt, Germany. It got off to a good start when our cab driver played “New York, New York” by Frank Sinatra in honor of us. We told him that we were from Iowa and he asked if we were cowboys or American football players. We had to disappoint him by saying we were financial advisors and mediocre soccer (I mean futbol) players but he was happy to learn that John Wayne was born in Iowa.
At the conference, there has been much discussion about “smart index” strategies and whether or not they are really smart. Sherpa has been ahead of this curve by using “smart index” stock funds for the last few years that weight companies based on their fundamentals (such as sales, profits, and dividends) as opposed to weighting them by the traditional method of market capitalization (market size).
The smart index funds have outperformed traditional index funds consistently and as a result have garnered many assets and attention of late. The debate at the conference surrounds the reasons for the success of the smart index funds and whether they can continue to perform well. We believe that smart index funds provide a way to purchase stocks at a discount to their fair market value at a very low cost. Therefore, these indexes are truly smart!
PS – Here are two pictures, one of the conference center and one of a bathroom that costs one euro to use (the attendant had to tell me why the door was locked:)