WELCOME!

Peterson Research Institute (PRI) was created to conduct a range of investment, financial research and consulting activities.

John Peterson has over 40 years experience in the financial and investment industry, having held senior roles with Bankers Trust, the Commonwealth Bank, and a number of investment management firms, consultants, and superannuation funds. In addition to management positions, John has held a number of independent Board and Compliance Committee positions with organisations including Constellation Capital, Platinum Asset Management and Barclays Investments. John has a First Class Honours Degree in Commerce majoring in Economics and Finance.

Research covers a range of interests in the fields of economics, finance and investments, and business management.

This includes original research and concepts including, the Application of Complexity (Chaos) Theory to Economics, Risk Budgeting, Investment Performance Measurement, Manager Research and Selection and,in conjunction with Dr Julie Peterson, the concept of Organisational Resilience and ideas related to effectively using the skills of individuals with Asperger's Syndrome in organisation.

A number of these research pieces are available for downloading.

Comparing the Active and Passive Pair - Australian Super and Hostplus
Original Research Note August 2017

Australia's largest superannuation fund, Australian Super, offers 2 options with equivalent risk and return expectations, but materially different portfolio construction.

The Balanced option employs an active approach to investment management, whereas the Indexed Diversified option invests only in indexed strategies. As expected the Indexed Diversified option has significantly lower levels of investment fees.

Counter to what appears to be the consensus view among regulators and the press, the actively managed Balanced option has consistently and substantially outperformed its indexed equivalent.

The 2018, 2019 and 2021 Reserch Updates also include the results for Hostplus Super's equivalent experiment.

Click here to download a copy of the 2021 Update
Click here to download a copy of the 2019 Update
Click here to download a copy of the 2018 Update
Click here to download a copy of the original 2017 Research Note



Key concepts: Active Investing, Passive, Investment Fees, Superannuation, Regulation, Active / Passive Debate

The Consistency of Manager Performance - October 2017

The typical, and long-standing, approach to assessing the consistency of manager performance is fundamentally flawed.

This Research Note develops a new approach to assessing consistency and demonstrates that the performance of active managers in Australia has been consistent.

An implication of this finding is that investors do have the ability to select active investment managers who will perform in the future.

Click here to download a copy of the original 2017 Research Note
Click here to download a copy of the 2018 Research Note



Key concepts: Manager performance, Consistency, Active Investing, Passive, Active / Passive Debate

Manager Performance - 2018

Standard & Poors holds itself out as: 'the de facto scorekeeper of the active versus passive debate' and their latest contribution is the Standard & Poor's Index Versus Active (SPIVA) Australian Scorecard as at June 2018

This Research Note explains why the SPIVA analysis contains significant flaws.

In particular, the S&P SPIVA analysis is not comparable to, and is therefore irrelevant for, Institutional Superannuation Funds.

Indeed, if appropriately adjusted to reflect an institutional manager selection process and fees, it is highly likely that managers appointed by Australian Superannuation funds would be found to consistently add value.

Click here to download a copy of the Research Note



Key concepts: Manager performance, Consistency, Active Investing, Passive, Active / Passive Debate

Catch 97 - October 2017

From 1 October 2017 Australian Superannuation Funds are required to report information on investment and other costs in their offering documents according to the requirements of Regulatory Guide 97 (RG 97).

RG 97 is contentious, and has been the source of much disquiet and discussion around its implementation.

One of the issues that has not been focussed on is that definitions in RG 97, which are now being implicitly accepted by superannuation fund trustees, are inconsistent with the investment beliefs those trustees have previously expressed. This suggests that trustees are publicly admitting that they have not acted in the best interests of their members.

Click here to download a copy of this Research Note



Key concepts: Superannuation, Regulation, RG 97, Active Investing, Passive, Investment Fees, Regulation, Active / Passive Debate

UK Financial Conduct Authority
Asset Management Market Study Submission: February 2017

The Interim Report of the FCA's Asset Management Market Study reported 'research' based on assumptions that do not reflect the actual market conditions faced by investors and investment managers in the real world. As a result most of the assertions made are unsupported.

In particular, the results of the analysis relating to the consistency of manager performance, and hence the ability of investors to select managers that will add value through active management in the future, is flawed.

The submission explains the correct way to assess manager performance in complex markets, and found that investment managers available to UK investors have demonstrated consistency of performance.

Click here to download a copy of this Submission



Key concepts: Consistency of Investment Performance, Complex Markets, Active / Passive Debate, Manager Selection

Australian Productivity Commission
Study into the Competitiveness and Efficiency of the Superannuation System: September 2016

Following the Cooper Inquiry into Superannuation, the subsequent introduction of the Stronger Super / MySuper regulatory regime has created a significant distortion in the market signals being focussed on by Superannuation Fund Trustee Directors and Investment Management by creating a primary focus on cost management rather than net investment returns to investors. The effect of this distorted focus has been to effectively reintroduce a prescriptive investment directive favouring an indexed over active investment approach.

It is demonstrated that the premise on which this distortion is based - that active managers do not perform consistently - has been incorrectly assessed. Specifically, every research study conducted into the consistency of manager performance has been flawed, and has merely assessed whether investment markets are static. The submission explains the correct way to assess manager performance in complex markets, and finds that investment managers available to Australian investors have demonstrated consistency of performance.

It is demonstrated that Australian Superannuation Funds have historically been able to select managers that add value after accounting for fees, with Funds with greater allocations to manager skill producing higher investment returns with lower risk. The cost, in lost investment returns, to Australian investors in superannuation resulting from the distorted signals to investors is conservatively estimated at $10 Billion per year.

Click here to download a copy of this Submission



Key concepts: Consistency of Investment Performance, Complex Markets, Active / Passive Debate, Manager Selection, Regulation, MySuper

Hedge Funds
Looking back - Moving Forward: October 2010

A review of the performance of Hedge Funds through and following the Global Financial Crisis

While many hedge fund strategies employed by Australian Investors performed poorly, especially fund-of-hedge-funds, an assessment of the actual, as opposed to perceived performance of hedge funds indicates that hedge funds performed broadly in line with reasonable, informed expectations.

Actual results delivered were strong relative to other market linked investments.

Click here to download a copy of this Research



Key concepts: Hedge Funds, Expectations, Market Rationality, Due Diligence

The Performance of Investable Hedge Funds
Do Superior Managers Ration Capacity?: or why investable indicies are poor investments

An analysis of the performance of Investable Hedge Fund indexes and funds

Investable Hedge Funds (in effect a form of fund-of-hedge-fund) were proposed as a cost effective method for emulating the performance of actively managed funds-of-hedge-funds. They were originally "sold' on the basis of strong outperformance of back tested portfolios.

Actual results delivered were extremely disappointing for investors. This Research Note reports the results of an attribution of the performance of the CSFB Tremont Investable Hedge Fund Index over the period from its inception (August 2003) to August 2007.

It was found that the investment managers who made their funds available for inclusion in this investable index fund consistently underperformed their peers. Or in other words, the most desirable and successful hedge fund managers rationed their capacity

Click here to download a copy of this Research Note



Key concepts: Investable Hedge Funds, Active Management, Passive Management, Superior Managers, Capacity Rationing, Manager Skill, Predictable Performance

Economics Honours Thesis, University of New South Wales 1983
"Uncertainty in Economics: An extension of Keynes' analysis"

An integration of the economics of John Maynard Keynes' General Theory of Employment Interest and Money (1936) with Chaos (now Complexity) Theory.

This thesis addresses three main topics:

1. An analysis of the concept of "general" as used in economics
2. An analysis of the behaviour of economies under conditions of uncertainty and the importance of expectations; and
3. A demonstration that it is possible to construct a theoretical model that incorporates expectations as an endogenous variable and is consistent with the General Theory.

The overall conclusion of this analysis is that, given the conditions found in the real world, the scope for accurate long-range prediction of the state of the economy is very limited.

Please note that this is a large pdf (5.2 meg) as it is a scan of the Reserve Bank of Australia Library's original printed document.

Click here to download a copy of this thesis



Key concepts: Generality, Uncertainty, Expectations, Periodic Model, Difference and Differential Equations, Chaos, Complexity, Sensitivity Dependence on Initial Conditions, Attractors, Strange Attractors, Periodicity, Limit Cycle, Non-Monotonic Functions, Bifurcation, Metrical Universality, Phase Space, Natural Period, Equilibrium