ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2014-11-11 00:00:00 A First Look at Morningstar's Analyst Ratings by Robert Huebscher (Article)

Overwhelming academic evidence documents the difficulty in distinguishing skill from luck among actively managed mutual funds. Despite this fact, many vendors have attempted to identify those that will beat their benchmarks and deliver excess risk-adjusted returns. Noteworthy among those vendors is Morningstar, which offers forward-looking "analyst ratings." We've evaluated the predictive ability of the first vintage of those ratings, which were published three years ago.

2014-02-04 00:00:00 It Looks Messy Even From a Distance... by Jerry Wagner of Flexible Plan Investments

Im traveling outside the country but I am never far from the latest financial market update. I saw todays market move and with the sluggish start to the New Year in stocks, I thought Id drop you all a line with my thoughts.

2014-01-13 00:00:00 Equity Bubble? No. by Richard Bernstein of Richard Bernstein Advisors

The US stock market performed very well during 2013. The S&P 500s total return of nearly 33% far outpaced the returns of most asset classes. A growing contingent of market observers is fearful that the US equity market is in some sort of a bubble. We disagree completely with this notion. A strong market rally that many investors have missed is hardly sufficient grounds for a financial bubble.

2013-12-31 00:00:00 Why Resolutions Are Easy to Make...and Hard to Keep by Jerry Wagner of Flexible Plan Investments

Its that time of year again when resolutions are supposed to be made. Typically this is a January 1st task as we face a new year and everything starts over again.

2013-10-08 00:00:00 The Futility of the Endowment Model by Robert Huebscher (Article)

In the past two decades, the so-called endowment model has been adopted by hundreds of endowments, foundations and advisors ? particularly those serving ultra-high-net-worth clients. By aggressively allocating to illiquid alternative asset classes, those investors hoped to duplicate the results of Yale and other top-tier institutions. New research exposes the futility of those efforts.

2013-09-20 00:00:00 Will Europe's Improving Economy Push Interest Rates Higher by Giordano Lombardo of Pioneer Investments

Gross Domestic Product (GDP) increased in the second quarter after six straight declines. Data expectations were on the optimistic side, but investors appeared to become more confident before the release, thanks to encouraging evidence from supposedly reliable forward-looking indicators.

2013-09-18 00:00:00 Dow Changes as a Contrary Indicator by Bill Smead of Smead Capital Management

The folks who select the companies in the Dow Jones Industrial Average (DJIA) came out with their latest changes on Monday, September 9, 2013. They removed Bank of America (BAC), Hewlett Packard (HPQ) and Alcoa (AA) from the DJIA. Added to the index were Visa (V), Nike (NKE) and Goldman Sachs (GS). At Smead Capital Management, we are always looking for important psychological clues to human behavior as it pertains to the popularity of common stocks.

2013-07-16 00:00:00 Letters to the Editor by Advisor Perspectives (Article)

A reader responds to the ongoing exchange of letters regarding socially responsible investing, and a reader responds to Joe Tomlinson’s article, Retirement Portfolios: Fears over Rising Rates are Overblown, which appeared last week.

2013-06-12 00:00:00 Silver Lining: Fed's Tapering Signals Stronger Economy by Eric Takaha of Franklin Templeton Investments

The Federal Reserves warning that it planned to scale back purchases of Treasuries sparked a storm on Wall Street, bringing instability to what had been a pleasant May in the US markets. Almost lost in the noise, however, is a silver lining: the Fed thinks the economy may be healthy enough to fly on its own.

2013-06-11 00:00:00 Letters to the Editor by Various (Article)

A number of readers responded to Adam Kanzer’s article, Exposing False Claims about Socially Responsible Investing, which appeared last week. Kanzer’s article was in response to Adam Apt’s article, Measuring the Cost of Socially Responsible Investing, which appeared the week before. Several readers responded to other articles as well.

2013-05-07 00:00:00 The Satisfaction Gaps that Cost You Clients by Dan Richards (Article)

Most advisors recognize that clients are unhappy with returns in the last decade, but believe they are satisfied with communication and the relationship as a whole. That’s why three recent conversations I’ve had with investors and advisors should set off alarm bells.

2013-04-09 00:00:00 Letter to the Editor by Various (Article)

This is in response to Joe Tomlinson’s article, Choosing an Actively Managed Fund: What Works and What Doesn’t, which appeared last week.

2013-04-02 00:00:00 Choosing an Actively Managed Fund: What Works and What Doesn’t by Joe Tomlinson (Article)

Few topics have been studied as closely as selecting actively managed funds that will outperform the market. Advisors who use such funds need to be confident in their choices ? and justify their methodology to clients. Here’s what the latest academic research says on this highly contentious issue.

2013-03-26 00:00:00 How to Invest Like Buffett by Robert Huebscher (Article)

Listen to Jim Cramer or his cohorts on CNBC and you’ll hear statements like, “Don’t settle for the mediocre returns of a market index!” and “It’s not that hard for investors to pick stocks that will beat the market!” Unless you possess the skills of Warren Buffett, that’s not true. But in the book Think, Act and Invest Like Warren Buffett, Larry Swedroe says you indeed can invest like Buffett ? just not by stock-picking.

2013-03-06 00:00:00 Lessons Learned by Jerry Wagner of Flexible Plan Investments

The need for taking precautions, preparing for emergencies, having "just-in-case" options, was a much discussed topic...right after the 2000 and 2008 market crashes. Not so much anymore.

2013-03-05 00:00:00 Selecting Truly Active Equity Funds by C. Thomas Howard, PhD (Article)

In a recent Advisor Perspectives article, Joe Tomlinson reported evidence showing that 401(k) plan sponsors add value in selecting funds, but their risk-adjusted alpha is not enough to beat a comparable index portfolio. Tomlinson then pointed out the need for additional research to help advisors improve upon the fund selection process. As a step in this direction, I will report on research conducted by my firm and other academics.

2013-02-26 00:00:00 Can Advisors Add Value Through Fund Selection? by Joe Tomlinson (Article)

Low-cost index funds will beat the average actively managed fund after expenses. But can advisors identify superior active funds to overcome this disadvantage? Advisors who believe they can choose those funds will be challenged by the results of two studies from the defined-contribution industry.

2013-02-20 00:00:00 Nervous Investors Approaching a Trap? by Jerry Wagner of Flexible Plan Investments

With the S&P 500 reaching new post-crash highs, it is interesting, to say the least, that most individual investors are not bullish on stocks. Rather, as the market has moved relentlessly higher this year, individual investors have turned more and more bearish.

2013-01-03 00:00:00 Beyond the Fiscal Cliff by Richard Bernstein of Richard Bernstein Advisors

Politicians love the spotlight, but it is very unfortunate that investors watch the show. The drama of the so-called "fiscal cliff" has scared investors, and led them to miss a very good year in the equity market (the S&P 500's total return was 16.0% during 2012 versus the long-term annual average of 11.8%). It appears as though Washington wants to continue to dominate the headlines, which means that it may be more important than ever for investors to downplay Washington's theatrics.

2012-11-06 00:00:00 Asset Location: Nine Tips to Create ?Tax Alpha? by Glenn Frank (Article)

With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead ? however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets ? in taxable or tax-sheltered accounts.

2012-10-23 00:00:00 She Turns Sea Shells by the Sea Shore by Mariko Gordon (Article)

I love the sea. Always have. I explain how my seaside search for shells while unplugging on the Gulf Coast of Florida led to some useful insights related to uncovering an investment manager's process.

2012-10-09 00:00:00 Is Gluskin's David Rosenberg Right about Utilities? by Geoff Considine (Article)

They're not the sexiest property on the Monopoly board, but in today's market, there's plenty of evidence mounting that utilities are a great source of income. Indeed, Gluskin Sheff's David Rosenberg made the case for utilities in a recent commentary.

2012-09-18 00:00:00 Letters to the Editor by Various (Article)

Several readers respond to our article, Can Our Retirement System be Fixed?, which appeared last week. A reader responds to Bill Gross' commentary, The Lending Lindy, which appeared on September 5, and a reader responds to David Schawel's article, Three Bond Funds for Rising or Falling Rates, which appeared last week.

2012-09-11 00:00:00 Three Bond Funds for Rising or Falling Rates by David Schawel, CFA (Article)

Several actively managed bond funds have achieved significant outperformance relative to their benchmarks despite recent low interest rates. The strategies employed by these funds can and will continue to outperform without needing rates to fall further.

2012-03-13 00:00:00 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)

Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.

2012-02-21 00:00:00 A Simple Email to Save a Client by Dan Richards (Article)

A recent conversation got me thinking. Losing a client is a painful experience -even more so when you realize that something as simple as an email could have avoided that outcome.

2012-01-24 00:00:00 Must Bond Investors Fear Rising Interest Rates? by Andrew D. Martin (Article)

Thirty-one years ago, in 1981, the one-year Treasury reached its all time high of 14%. Today it hovers around 0.10%. Never before have interest rates fallen so far. Many economists and investment advisors, seeing nowhere to go but up, expect interest rates to climb from these historic lows. But that would not be the catastrophe that many bond investors fear.

2012-01-10 00:00:00 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)

Ron Surz provides his award-winning commentary on the US and global markets.

2011-11-29 00:00:00 The Investment Case for Israel by Jamia Jasper (Article)

What country went into the 2008-2009 recession in a stronger position and exited sooner than any western nation? Whose stock market has outperformed the MSCI EAFE over the past 10 years?

2011-11-22 00:00:00 Morningstar?s Attempt to Predict Performance by Robert Huebscher (Article)

Few question that skillful mutual fund managers exist, but virtually all attempts to identify them ex ante have failed. Last week, Morningstar took up the challenge with its Analyst Ratings, which aim to identify funds with the 'long-term potential for superior risk-adjusted performance.' Given the futility of such efforts over the last several decades, advisors should approach this new effort with skepticism.

2011-11-01 00:00:00 The Small Cap Falsehood by Michael Edesess (Article)

The supposed outperformance of small cap stocks is a foundational precept on which many respected asset managers have staked their expertise over the years ? foremost among them, Dimensional Fund Advisors. A growing body of research, however, shows no such advantage for the last 30 years and, now, a new study seems to have proven that the supposed small-cap advantage may have never existed in the first place.

2011-10-18 00:00:00 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)

Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?

2011-09-27 00:00:00 Do Low Correlations Favor Active Managers? by FundQuest Investment Management & Research Group (Article)

There has been much debate regarding the challenges for active managers in market environments with persistently high correlations. Some argue that high correlations hinder active managers seeking to generate alpha through security selection. Indeed, in a recent study, we found that active managers were more likely to succeed in low-correlation environments.

2011-09-13 00:00:00 The Risks of Exchange-Traded Products by Dennis Gibb (Article)

Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.

2011-08-23 00:00:00 Strategies for a Rising Rate Environment by Jayant Kumar of Fisher Francis Trees & Watts (Article)

Shortening the duration of a fixed-income portfolio is often considered the default option, but it is not the only way to hedge against a potential rise in interest rates. This article provides investors with a framework to analyze and implement a range of fixed-income strategies, and highlights various investment considerations that should carefully be taken into account.

2011-06-28 00:00:00 Reducing Risk through Value-Oriented Tactical Strategies by Mark E. Ricardo, JD, LLM, AAMS (Article)

Conventional wisdom was that the best way to reduce portfolio risk is to adopt a diversified long-term strategic asset allocation. That paradigm was challenged - deservedly so - following the 2008 financial crisis. Fortunately, an improved paradigm has emerged: Investors should combine long-term strategic allocations with a value-oriented tactical rebalancing strategy.

2011-04-12 00:00:00 Dumb, Dumber and Dumbest by Barry M. Ferguson (Article)

The two stupidest characters ever to grace the big screen - Lloyd Christmas and Harry Dunne - were first introduced to the world in Jim Carrey's 1994 movie, Dumb and Dumber. If that movie were made today, its leading characters could easily be our government and the supposedly independent Federal Reserve Bank. Both of these institutions have foisted their misguided policies on the American public, who, in their passive acceptance, have proven themselves to be the dumbest of all.

2011-03-22 00:00:00 Consensus: Groundhog Decade for Stocks by Ed Easterling (Article)

Just as Bill Murray woke up to the same thing day after day in the movie 'Groundhog Day,' it's likely that your outlook foretells a groundhog decade for the stock market that will repeat its near-breakeven returns from the past decade.

2011-01-25 00:00:00 Ten Resolutions for Greater Prosperity in 'The Year of the Fiduciary' by Jeffrey Briskin (Article)

If you think selling and servicing 401(k) plans isn't easy today, ERISA is about to make it even harder. The good news is that firms that adjust to these challenges can use them to their competitive advantage Here are ten steps your firm can take to prepare for The Year of the Fiduciary.

2011-01-25 00:00:00 Demand Transparency in an Opaque Mutual Fund World by Andy Rachleff (Article)

Too many investors will end up in actively managed funds that fail in their mission to outperform a passive benchmark. And investors won't know until it's too late because they lack the information to evaluate which funds might consistently outperform the market.

2010-09-28 00:00:00 A Better Alternative - Natural Resource Equities by RS Investments (Article)

Investors look to the commodity market to provide three primary benefits: portfolio diversification, inflation protection, and equity-like returns. However, empirical data shows that over the last decade, shifts in underlying fundamentals have undermined the role which commodities are expected to play in a diversified portfolio, particularly relative to natural resource equities. RS Investments reviews the return streams generated by both commodities and natural resource equities in the context of the benefits expected from each investment option. We thank them for their sponsorship.

2010-09-14 00:00:00 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)

Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.

2010-07-27 00:00:00 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)

In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.

2010-07-20 00:00:00 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)

After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.

2010-06-08 00:00:00 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)

The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.

2010-05-18 00:00:00 Actively Passive or Passively Active? by Craig L. Israelsen, Ph.D. (Article)

The active-passive debate typically centers on the nature of the investment product - whether it is an actively managed fund or a passive index fund. This, however, is only one aspect of that debate, and to consider it alone represents too simplistic a view, says Craig Israelsen in this guest contribution. A broader issue, namely how a portfolio of actively or passively managed funds is managed over time, has a more profound impact on whether one is truly an active or passive investor.

2010-05-11 00:00:00 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)

Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.

2010-04-06 00:00:00 Follow-up to the Folly of Peer Group Analysis by Various (Article)

In response to a recent commentary by Research Affiliates, The Folly of Peer Group Analysis, a reader offers his own research on the performance of indices against peer groups, once impurities have been eliminated from those peer groups. John West and Ryan Larson of Research Affiliates provide additional analysis.

2010-02-23 00:00:00 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)

The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.

2010-02-02 00:00:00 Martijn Cremers on Active Management by Dan Richards (Article)

Martjin Cremers is an associate professor of finance at the Yale School of Management. He and his Yale colleague Antti Petajisto have conducted research that focuses on "active share" in mutual fund management. In this interview, Cremers discusses the implications of his research.

2009-12-22 00:00:00 The Danger of "Expert Advice" - Financial or Otherwise by Kim Snider (Article)

A study by three neuroscientists at Emory University finds that when given expert advice, the decision-making part of our brain shuts down. That's not a big deal if the advice we are receiving is good. But what if it isn't? In this guest contribution, Kim Snider explores the problems with relying too heavily on supposed experts, and how to counsel clients who fall into this trap.

2009-12-01 00:00:00 Hidden Cost of Active Management by Mark Kritzman (Article)

There is a hidden cost associated with most active funds, writes Mark Kritzman of Windham Capital Management in this guest contribution. The typical active fund is more than 90% correlated with the market. Yet their relatively high active management fee is applied not just to the fund's active component but to its market component as well.

2009-11-24 00:00:00 Buy Bonds and Not Bond Funds by Hildy and Stan Richelson (Article)

Record inflows into longer-term bond funds in the last six months have provided investors purported relief from the near-zero returns in money market funds. Do not mistake those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest contribution. Bond funds are inferior to individual bonds, as those who are now buying bond funds may soon discover.

2009-11-17 00:00:00 Letters to the Editor by Various (Article)

We have two letters to the Editor - one responds to last week's interview with Bruce Greenwald and the other responds to two recent articles which argued that advisors should avoid active management.

2009-11-03 00:00:00 Alpha or Wealth? by Sam Bass (Article)

It is widely accepted that ETFs offer significant advantages over mutual funds, especially lower costs and taxes. But, as advisor Sam Bass argues in this guest contribution, the mutual fund industry may be all the more concerned that increasing numbers of investors are accepting the view that ETFs, and passive strategies in general, are better for wealth accumulation than active management - even if one assumes active strategies can generate positive alpha over extended periods of time.

2009-09-08 00:00:00 Infrastructure Investing by Michael D. Underhill (Article)

With global markets improving, liquidity returning to the credit markets, and valuations improving, the infrastructure market looks promising. In this guest contribution, Michael Underhill argues that infrastructure assets,when chosen correctly, can diversify an investor's portfolio because of their low correlation with other asset groups, their consistent returns coupled with lowered levels of risk, and their potential for inflation-linked returns.

2009-09-01 00:00:00 Actively Managed TIPS ? A Correction by Robert Huebscher (Article)

Our August 18 article, Actively Managed TIPS?, contained a glaring factual error that we need to correct. In addition, a reader has challenged some of the assertions in that article, and we respond to those challenges.

2009-08-25 00:00:00 The New Normal and Asset Allocation Merriman?s Response by Larry Katz, CFA (Article)

Larry Katz, Director of Research at Merriman, Inc., responds to Geoff Considine's article two weeks ago, What the New Normal Means for Asset Allocation. He has multiple objections concerning much of Considine's logic, and would not recommend his alternative portfolio to their clients.

2009-08-25 00:00:00 Letters to the Editor by Various (Article)

In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.

2009-08-18 00:00:00 Actively Managed TIPS? by Robert Huebscher (Article)

When PIMCO talks, the market listens. But we mustn't forget that the bulk of PIMCO's revenue comes from actively managing bond portfolios so, when they claim that alpha can be earned by actively managing TIPS, a healthy dose of scrutiny is warranted. Our article shows why that scrutiny is justified.

2009-08-04 00:00:00 Letters to the Editor by Various (Article)

In our letters to the Editor, readers respond to last week's article, How Long is the Long Run?, Geoff Considine's article, The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie , and Ted Wong's article, Moving Average: Holy Grail or Fairy Tale - Part 3.

2009-07-21 00:00:00 Q2 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)

Each quarter we analyze changes in the Advisor Perspectives database - a $50+ billion universe of high- and ultra-high net worth assets managed by Registered Investment Advisors. Our analysis has three parts. We look at changes in asset allocation, the performance of the most popular mutual funds, and the mutual funds that showed significant gains or losses in popularity during the quarter.

2009-07-21 00:00:00 Letter to the Editor Compelling Evidence that Active Management Really Works by Various (Article)

In a letter to the Editor, a reader challenges some of the findings reported several weeks ago in an article, Compelling Evidence that Active Management Really Works.

2009-06-23 00:00:00 Compelling Evidence That Active Management Really Works by Ken Solow (Article)

The majority of academic studies conclude that active management does not add value for investors. However, a closer look at how many studies were conducted reveals several flaws in their methodology that are not as well-known as the accepted conclusion about active versus passive management. Guest contributor Ken Solow revisits work by two Yale researchers showing the value added through active management.

2009-06-09 00:00:00 Q1 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)

Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on performance across the most popular mutual funds.

2009-05-26 00:00:00 The Importance of Being Active by C. Thomas Howard, PhD (Article)

New research from Tom Howard of Athenainvest shows buying and holding the typical active US equity fund is a recipe for underperformance. On the other hand, Howard shows that funds actively placing stock selection bets and enjoying recent return success earn increasingly superior returns and experience an improved likelihood of beating the market as the fund ages. Howard argues for the importance of being truly active as a fund manager.


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