AFTER all the mayhem, drama and furious end-game finishes, the electrifying 2011 NBA playoffs are down to four exciting teams—Derrick Rose’s regular season-best Chicago Bulls face the superstar-laden, mutant-like firepower of the Miami Heat, while the sharp-shooting Dallas Mavericks battle league-leading scorer Kevin Durant’s young and talented Oklahoma City Thunder in the West.
Fascinating storylines abound, which include the phenomenal talents of LeBron James, Dwayne Wade and Chris Bosh moving to South Beach to form a scary new “Big 3,” the New York Knicks winning the Carmelo Anthony sweepstakes, the youthful resurgence of Oklahoma, Memphis and Chicago, questions on the retirement age policy of the Boston Celtics, and of course, Dallas’ shocking 4-0 playoff elimination of Kobe Bryant & the defending champion LA Lakers early in the second round.
When the dust settles and the smoke clears however, the team emerging with the greatest player, the best coach and the biggest heart will succeed. For these reasons, I pick the young Bulls to beat the Heat, and then ultimately to win it all this year. Let’s talk more about this later.
In the world of global investments, an equally competitive “playoff” is raging—with Exchange Traded Funds (ETFs) challenging Mutual Funds (MFs) in an epic battle for investors’ coveted cash. Who will win?
Filipinos are more familiar with MFs, which are pooled funds investing in bonds, stocks and/or alternative investments as underlying assets. These are usually actively managed funds, with professional fund managers aiming to generate returns better than the market average (i.e. equity, fixed income benchmarks). Investors also benefit from greater diversification (sector allocation), government regulation (SEC) and better liquidity. Active management makes these funds ideal for investors who want to take strategic, long term positions. A complete list of Philippine-registered mutual funds is available at: www.icap.com.ph.
Meanwhile, ETFs are passively managed funds (index-linked funds) and are fast gaining popularity here from savvy Filipino investors looking to take opportunistic short term, tactical positions in various markets. ETFs are funds with equity-like characteristics, which trade on stock market exchanges, and allow investors to track the performance of any market or investment theme, at a low cost. Popular ETF issuers such as State Street Global Advisors (SPDR) and iShares have ETFs ranging anywhere from Middle Eastern and African equities, European bonds or even commodity-linked futures contracts (i.e. gold, oil).
ETF investors benefit from transparency and predictability, because ETFs stick to a single strategy or defined portfolio, so investors know that what they buy today will be what they hold tomorrow. ETFs also provide individual investors the ability to match big institutions both in the breadth of investible asset classes and low management fees. Costs are lower because ETFs follow passive stock market indices, eliminating the cost of employing high-priced analysts to pick companies for investment.
Unlike the NBA playoffs which end with a clear champion, both ETFs and mutual funds can coexist peacefully in an investment portfolio. ETFs’ low costs provide financial flexibility to participate in short term market opportunities in a wide range of assets, while MFs provide active management for taking effective core, long term investment positions. The key is finding the right mix of investments (asset allocation), to maximize portfolio returns and to minimize risk.
In that sense, successful investors are actually like great NBA coaches. Phil Jackson (Bulls, Lakers) and Red Auerbach (Celtics) are two of the greatest, having won a combined 20 NBA Championships by fielding the right players at the right time and by guiding and motivating their teams to consistently execute plays and make needed adjustments under intense the playoff pressure.
As for the Chicago-Miami series—odds-makers favor the Heat to win, mainly because of the Wade and LeBron factor. I disagree, because the defensive genius of Coach Tom Thibodeau, the collective efforts of one of the NBA’s deepest teams at all positions and the great play of reigning league most valuable player, D-Rose, can more than offset the abilities of two men. This series may reach the full seven games. Chicago won all three games against Miami in the regular season, but each game by less than 5 points.
My guess is that Chicago exploits its rebounding advantage to control the flow of the game, while employing a stifling team defense that halts the feared, attacking Miami offense—by forcing Wade and James to give up the ball and become facilitators. The Dallas-Oklahoma series likewise looks interesting, with the experienced Mavericks enjoying an advantage over the under-aged Thunder. I believe experience normally wins, unless the other team has a special player named Kevin Durant.
So that’s my unpopular, non-consensus, end-game scenario—which has the Bulls meeting the Thunder in the 2011 NBA Finals in June. Chicago can wrap this up within six games, giving the Windy City,a first in NBA Championship since the Michael Jordan era. Some may think these underdog picks don’t have a chance, and I don’t blame them. I remember a Filipino adage my former coach loved to say, back in my playing days, before facing stronger teams in our summer hoops leagues in BF Homes, Parañaque—bilog ang bola.
(The author is the vice president and equity portfolio manager for international equities at ATR KimEng Asset Management and is a member of its investment committee. For comments, you may e-mail him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .)
