There is only the claim that all available information is incorporated into the price, so there’s no exploitable (predictable) variance.
The author gives a specific example of an exploitable price: The stock of Hong Kong Land, where the underlying real estate assets are being priced at 25 cents on the dollar because they’re packaged into a listed equity.
His claim is that anyone buying this equity at its current price is exploiting the market by a factor of 4x by achieving an equity-like 10%/yr return, but with the low risk/volatility of a 2-4% real estate asset or close.
He claims that this price inefficiency persists because there aren’t many people in a position to hunt for and invest in these kinds of arbitrages, because funds often structurally restrict themselves to investing in one type of asset class (i.e. leaky abstraction). So in this case, the inefficiency persists because there are not enough fund managers like himself: competent enough to recognize attractive real estate investments but not structurally limited to the Real Estate asset category.
The author gives a specific example of an exploitable price: The stock of Hong Kong Land, where the underlying real estate assets are being priced at 25 cents on the dollar because they’re packaged into a listed equity.
His claim is that anyone buying this equity at its current price is exploiting the market by a factor of 4x by achieving an equity-like 10%/yr return, but with the low risk/volatility of a 2-4% real estate asset or close.
He claims that this price inefficiency persists because there aren’t many people in a position to hunt for and invest in these kinds of arbitrages, because funds often structurally restrict themselves to investing in one type of asset class (i.e. leaky abstraction). So in this case, the inefficiency persists because there are not enough fund managers like himself: competent enough to recognize attractive real estate investments but not structurally limited to the Real Estate asset category.