Introduction of the Global Trend

Exchange traded funds and the mutual funds are used as the barometers by the analysts for the investor sentiment. This is because they provide the insights about where the investors are moving their money. The bearish or the bullish feelings in the market are determined by the market watchers by looking at these numbers. The investors have started to reposition their portfolios for growth and safety because of the high volatility within the junk bond, commodity and equity markets since 2016(Dierking, 2016).

The economic landscape is also being shaped by the larger macro level events. The risks of the falling asset prices had been shown by the collapse of Third Avenue Focused Credit Fund. The managers of the fund had seen the race of the fund investors for exits as a result of the slump in the distressed debt. The redemption requests had been refused by the fund managers and they blocked the investors from getting their money in order to avoid the fire sale prices and finally on 11^th Dec, 2015, the fund was liquidated completely. Therefore, this case and similar other cases have spread fear within the mutual fund markets and the markets have failed to fully price this trend. The investors are running away from investing in mutual funds and this trend is growing globally.
Investment Strategy Project Harvard Case Solution & Analysis

Why the market has not fully priced the trend

There are a number of factors due to which the market has not fully priced the trend and due to which the investors are not investing in the mutual funds. These are discussed below:

One of the major trends observed in 2015 was the movement of the money to the international equity markets from the domestic equity markets and this trend has continued in 2016 and 2017 as well.
In times of the economic uncertainty, Gold has acted as safe haven and the price of the gold has increased as a result of the higher volatility within the equity markets. This had increased the value of the gold mutual funds and caught the eyes of the investors.
Index funding has been growing in popularity and this trend is still increasing. As a result of the underperformance of the actively managed mutual funds as compared to their benchmarks has resulted in the investor attrition and investors have started to favor the low cost structures with indexing.
In times of turmoil, investors moving away from mutual funds are becoming more interested in government and corporate bonds.
After the collapse of the Third Avenue Focused Credit Fund, the investors have moved ahead to invest in the high yield bonds. The above global factors have contributed to the uncertainty in the market and the market has failed to price the mutual fund value for the investors correctly.

Capitalizing the Trend

In this project, we attempt to capitalize on the above trend and show the investors how optimal portfolios could be formed in times of uncertainty to maximize the returns and minimize the risk of investment...............

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