We are often asked about our target turnover for the portfolios, and as in most cases in the investment world the answer is "it depends." Turnover is really market determined; depending on the opportunities we are seeing in the market our activity levels will go up and down. With that in mind I wanted to offer the following charts (from Credit Suisse):
Volatility is down significantly (in the U.S.) over the last two years and with that trading opportunities have been reduced. We have been less active in the market this year (as many of our trading partners have noticed) simply because there hasn’t been much to gain. While we trade our own funds we get paid as owners and not traders; so when there is little to do we will do nothing.
This is a fast paced industry where many agents are paid on activity rather than returns. Because of this there will always be noise and always be pressure to act. But sometimes in the market the best thing (and hardest thing) to do is nothing. As Howard Marks says, “When there is nothing clever to do, the mistake lies in trying to be clever.”