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Tea with ENZA: What is "window dressing"?

Friday, March 21, 2014

We often come across the phrase "window dressing" when we watch the business news on TV or read the "Money" section in the newspapers. What does it mean?

Does it mean buying some curtains and blinds for the windows in the buildings along Shenton Way?

Anyway, Solace, a guest blogger, asked that I put this question to ENZA and here is the reply:

Wow what a big question...

I assume your reader is asking about fund managers...

most fund managers do index hugging, only to what extend... So, there will be some winner and loser in the holding... they will normally look at the trend and decide. Trend in the sense of macro view, for example REITs is not going to do so well this year, they hold less...

They will never sell everything unless it is necessary (such as liquidation of funds or market correction)

FMs will sell the loss making fund and liquidate some of the profitable (due to client withdrawal or portfolio balancing after the selling of loss-making funds) However, this generally apply to big funds...

smaller Fund house don't do that due to the scale of the funds. (capital loss are deem to be eligible for a tax reduction at year end filing)

And window dressing normally occur for FMs at every quarter end.

No windows involved. Definitely, no curtains and blinds too.

Related post:
Tea with ENZA: Explaining Mr. Market's behaviour.


Matthew Seah said...


I think you did not really answer the question of what is 'Window dressing'..

At the end of each quarter (or semi annually in some cases), FMs take a snapshot of their holdings and present to investors in a report. In order for the FMs to look good, they sell losing counters, and buy hot favourites at the end of the quarter.

This way, the fund will look like they have been holding on to hot favourites for some time and thus are making money. Investors will also not be able to see a large portion of loss-making counters in the FM's portfolio as these have been sold before the snapshot was taken...

This is what I understand of 'window dressing'. Hope I understand it correctly. =)


AK71 said...

Hi Matthew,

Thanks for sharing this. :)

These sneaky fund managers! -.-"

Solace said...

Hi Ak,

I guess ENZA cannot reveal too much of information bcos of his occupation. That is understandable haha.

Thanks Matthew for adding that in. Window dressing, sell in may and go away, Santa claus rally are all interesting events in the stock markets, but it shouldn't affect most investor if we are investing for income and for fundamental reasons.

Now come my final question, what about Adam Cheng effect? Why hong kong makets drops when ever he releases new films LOL. :)

Ask for me hahaha

AK71 said...

Hi Solace,

Aiyoh! Adam Cheng? Er... I think I just developed selective amnesia. Cannot remember liao. ;p

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