Can man still hunt for Arbitrage?


The investment landscape is transforming with a lot of active managers failing to reach suitable alpha returns.

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The investment landscape is transforming with a lot of active managers failing to reach suitable alpha returns.

Therefore, we are seeing a global transition to a more passive investment strategy as index investing through mutual funds and ETFs is on the rise.

So are we saying the days of value investing and the great contrarian investors who starred into their crystals balls to predict the future are over? Particularly with the sophistication of investment models powered my mathematics and algorithms which consider more variables than the human mind can?

I will not limit the potential of robo advisors, high speed machine trading and other investment actions that take advantage of technology but I still believe that human beings can seek for the elusive alpha in their analysis of different securities particularly in private equity, forex and real estate.

This is not to say that machine learning cannot be applied to investments in this space but the volatility in some and the opportunity for arbitrage in others allows for human beings with either the right fundamental or technical knowledge to still capitalise on the difference in value.

Besides even traditional equity investments can still derive value, as companies like Berkshire Hathaway and Motley Fool, still manage to pick the stocks that are undervalued through understanding the nature of the business, its management and its position in its market.

However, anyone can easily tell you that investments in STEM and Health will have significant payouts as the global trend towards innovation and improved quality of life creates opportunities for the savvy entrepreneur and investor; which is why there is all that noise around cannabis investments due to its proven health effects.

Finally, Africa clearly offers an opportunity for high growth investments with is rich resources, large consumption base but dearth of infrastructure. In fact, African countries can be designed like an improved Dubai to be countries of the future from the onset with clean energy as primary energy source, proper recycling and waste reduction and management, electronic cars and trains amidst more eco-friendly architecture and infrastructure etc. And here, again we can see humans capitalising on these development opportunities.

So what ever way you chose to make you ROI, be mindful of the risk-return profile of the security and your own objectives and appetite.

God Bless

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