Enterprising Investor Podcast Summary: Andrew Ang on Value Investing and Portfolio Strategies
Episode Title: Andrew Ang: Value Investing and Portfolio Strategies
Release Date: May 15, 2025
Host: Allison Adams, Head of Research, Products, and Services at CFA Institute
Guest: Dr. Andrew Ang, renowned finance professor and former Head of Factors Sustainable and Solutions at BlackRock
1. Introduction to Andrew Ang
The episode opens with Allison Adams introducing Dr. Andrew Ang, highlighting his extensive contributions to the field of finance. With over 100 publications and significant roles at Columbia Business School and BlackRock, Dr. Ang is recognized for his pioneering work in factor timing and the development of BlackRock's first active ETF.
2. Andrew's Personal Journey
Dr. Ang shares his compelling personal narrative, tracing his roots from Malaysia to Australia and eventually the United States. He explains how his experiences as an immigrant shaped his academic and professional pursuits.
Andrew Ang [02:26]: "The CFA does the research is just, it's like oxygen for living. We just couldn't be investors without it."
Born in Malaysia, Dr. Ang moved to Perth, Australia, following racial unrest in his home country. Growing up as the only non-white child in his class sparked his curiosity and led him to pursue a Ph.D. in finance. His migration journey underscores the profound impact of opportunities provided by different societies on personal and professional development.
3. The Decline and Future of Value Investing
A significant portion of the discussion centers on the downturn of value investing between 2018 and 2020. Dr. Ang delves into the factors contributing to this decline and offers insights into the strategy's resilience and future prospects.
Andrew Ang [05:21]: "Value is a tried and true strategy... it's not surprising that value started to decline then."
Dr. Ang outlines the severe drawdown in value investing during this period, attributing it to late-cycle economic conditions and the unprecedented impact of the COVID-19 pandemic. He notes that value stocks, often laden with physical capital, struggled to adapt during the pandemic-induced disruptions. However, he also highlights the robust recovery of value investing post-November 2020, driven by market optimism and the development of COVID vaccines.
4. Portfolio Strategies in Turbulent Times
Addressing current market volatility, Dr. Ang provides strategic recommendations for portfolio construction and selection. He emphasizes the importance of maintaining a disciplined approach amidst uncertainty.
Andrew Ang [09:40]: "Don't panic, stay the course, don't make major changes unless you absolutely have to rebalance and ride it out."
Key strategies include:
- Rebalancing: Taking advantage of market turbulence by rebalancing the portfolio to capture premiums.
- Defensive Tilts: Marginal adjustments towards defensive assets such as cash, quality stocks, and high-quality fixed income.
- Diversification: Incorporating asset classes like hedge funds and CTA strategies that have historically performed well during downturns.
- Holistic Financial Planning: Considering broader financial factors beyond just portfolio composition, such as consumption adjustments and alternative financing sources.
5. Perspectives on Cryptocurrency in Portfolios
Shifting focus to emerging asset classes, Dr. Ang discusses the role of cryptocurrency in modern investment portfolios. He provides a nuanced view, balancing the high volatility and unique risk-return profile of crypto assets.
Andrew Ang [12:50]: "It's staggering just how right skewed this crypto market or asset is."
Dr. Ang advocates for modest allocation to cryptocurrencies, suggesting that holding around 1-2% of a portfolio in crypto can be appropriate for most investors. He explains that the pronounced right skewness of crypto assets, characterized by extreme positive returns in rare instances, presents both significant risks and opportunities. However, he cautions against overexposure due to the high volatility and the speculative nature of these assets.
6. Future Research: Tax Efficient Investing
Looking ahead, Dr. Ang expresses his interest in exploring tax-efficient investing strategies. He aims to address the complexities of joint tax location and asset allocation to optimize after-tax returns for investors.
Andrew Ang [17:10]: "A dollar of tax saved is far more valuable than a dollar of uncertain alpha."
His research focuses on the optimal placement of assets across different tax-advantaged accounts (e.g., IRAs, Roth IRAs) and taxable accounts. Dr. Ang believes that integrating tax considerations into asset allocation can significantly enhance the financial outcomes for millions of investors, especially in an era where individual responsibility for retirement savings is increasing.
7. Final Thoughts
Concluding the conversation, Dr. Ang offers heartfelt advice to his younger self, reflecting on his journey and the lessons learned.
Andrew Ang [20:44]: "Go and do it."
He emphasizes the importance of taking initiative and seizing opportunities, underscoring the value of perseverance and proactive decision-making in achieving professional and personal success.
Conclusion
In this insightful episode of the Enterprising Investor podcast, Dr. Andrew Ang provides a comprehensive analysis of value investing's challenges and resurgence, strategic portfolio management during volatile times, the cautious incorporation of cryptocurrency, and the promising field of tax-efficient investing. His blend of academic rigor and practical experience offers valuable guidance for investment professionals navigating the complex landscape of modern finance.