Insights into the world of high- and ultra-high net worth investing
June 16, 2009- Vol 3, Issue 24
In his keynote speech last week to
the Boston Security Analysts Society, Seth
Klarman discussed how he repositioned
his portfolio last fall to capture opportunities created in the wake of the
financial crisis. Klarman is the lead editor of the sixth
edition of Graham and Dodd's Securities
Analysis, and his fund, The Baupost Group, is among the top
performing hedge funds over its 27 year history.
New research shows widespread target-date
fund misuse and misperceptions by defined contribution plan
participants. Janus Investments' white paper shows that investors misunderstand the role of target date funds in
their overall portfolio and rely heavily
on their employer for investment advice. We thank them for
High-yield bonds have recently offered investors historically high spreads relative to
Treasury and investment-grade corporate bonds, presenting attractive current income potential in
today's low-rate environment. The current recessionary environment also
poses a heightened risk of default, underscoring the importance of security selection and intensive
analysis of underlying fundamentals. We thank Northern Trust
Investments for this contribution and their sponsorship.
The investment industry lost one of its leaders last week, when Peter L. Bernstein passed away at the
age of 90. As an author, Bernstein provided clarity and insight to
our understanding of risk and the way markets operate, through his books
and his newsletter, Economics and
Portfolio Strategy. We are republishing our interview with
him last January, when he foresaw many of the elements of the current
Buying and holding a diversified portfolio works well during good times,
but falls short when supposedly uncorrelated asset classes drop in unison
in bear markets. Are there alternative
investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to
determine their effectiveness.
Talk to advisors about the challenges
they face today and you'll get a lengthy list - often headed by
unhappy clients, reduced income and a struggle to stay positive and
productive. While these are all serious issues, says Dan Richards, for most advisors they
are dwarfed by the number one obstacle to
getting business back on track - rebuilding investor confidence in our
trust and integrity.
In this guest contribution, Gary Kinghorn of AdviceAmerica says that effective CRM system must be centralized
applications where all team members can view, share and update
information, such as client tasks, documents, data and portfolios. This
ensures everyone has current and accurate information at a glance.
In just two weeks, at the end of June, the Russell style indexes will undergo their annual reconstitution. A
lot has happened in the last year, especially to the finance sector. Ron Surz identifies the pressing
questions for financial advisors.
Lastly, we highlight submissions to Advisor
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Seth Klarman: Why Most Investment Managers Have It
Investment industry performance is almost universally evaluated using
short-term results - managers are compared using quarterly, monthly, or
even daily returns, creating extreme short-term pressures.
"Managers who do well in the short term are rewarded with more
assets," Seth Klarman said. "Those who do not do well in the
short term often don't survive to see the long term."
Seth Klarman: Why Most Investment
Managers Have It Backwards
Target-Date Fund Research from Janus
Janus recently conducted
two in-depth research projects to understand the opportunities and
challenges presented by target-date funds for defined contribution plan
participants. These findings reveal that many participants do not have
sufficient understanding of target-date funds or how to use them.* Advisors
who understand the strengths, weaknesses and appropriateness of target-date
funds have a largely untapped opportunity to add value for their clients.
*Based on a survey of 503 participants of 401(k) plans
conducted by Janus Capital Group and Brightwork Partners LLC in October
New Target-Date Fund Research from
Yield Bonds - A potential Opportunity for the Risk Tolerant
Yields in the high
yield market have been compelling in this low interest-rate environment but
there are important factors your clients need to consider before investing.
This whitepaper from Northern Trust Investments discusses the origins
of this unique market and its potential opportunities, looks at the recent
trend in spreads and studies the historical default rates in the high yield
market based on credit ratings of high yield issues.
High Yield Bonds - A potential
Opportunity for the Risk Tolerant
Peter L. Bernstein Remembered
Peter L. Bernstein, who passed away last week, was the author of nine
books, including "Against the Gods" and "Capital Ideas
Evolving." We spoke with him last January, on a morning the Dow
opened with a 450 point drop, and he offered his thoughts on prospective
market performance, risk levels, and whether securities were then
overvalued. He also discussed the investment strategy used by the
Yale endowment and its applicability for advisors
Peter L. Bernstein Remembered
Moving Average: Holy Grail or Fairy Tale - Part 1
The 10-month Moving Average Crossover system is a solid candidate to beat a
buy-and-hold strategy, according to Ted Wong, as it sidestepped two recent
bear markets in 2000 and 2008. But did it work in previous bear markets? Is
10 months the optimum length?
Moving Average: Holy Grail or Fairy
Tale - Part 1
Tackling Today's Number One Client Challenge
Rebuilding trust won't happen quickly or easily - and it's easy to put this
off as a result. Given its importance, however, it's essential that you
focus attention on this. Now's the time and today's the day to begin the
process of rebuilding client trust.
Tackling Today's Number One Client
What Separates Great from Ordinary CRM Systems
Hosted CRM applications that are tightly integrated with other software
platforms and advisor applications provide the right approach for small
office, independent advisors who are looking to maximize their efficiency
and offer superior service to clients without a great deal of additional
overhead and complexity.
What Separates Great from Ordinary
Annual Style Index Reconstitution: Good or Bad?
Investment managers can blindly follow the old reality of index construction
prior to the implosion of the financial sector, or they can make big bets
away from the indexes, exposing themselves to business risk. It's an ugly
dilemma because the right thing for investors could be the wrong thing for
their investment managers.
Annual Style Index Reconstitution:
Good or Bad?
from Advisor Market Commentaries
Nouriel Roubini writes that the collapse of the Thai baht in July 1997
helped spark the Asian financial crisis. Could events in Latvia spawn
a similar contagion? Eyes are focused on this small Baltic economy, amid
growing talk of a devaluation, due to the potential for spillover effects
into its fellow Baltics,
and the broader Eastern European region.
Is Eastern Europe on the Brink of an
Global finance ministers met in Italy over the weekend to discuss the state of the global
economy. The investment research team at Fortigent says there was
agreement from the group that the worst of the crisis appears to be over
and discussions actually turned to the possibility of crafting an exit
strategy from the numerous liquidity backstops that were implemented over
the past 18 months.
Global Leaders Provide Optimistic
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