Tag Archive for: investment

Harvard Management’s Mendillo grapples with challenging environment

/in /by

Even Jane Mendillo admits she had awful timing in becoming president and CEO of Harvard Management Company (HMC) on July 1, 2008. As she said in her presentation on “Endowment Management in a Changing World” to the Boston Security Analysts Society on March 25, she assumed her post
* Two days before commodity prices peaked
* Six weeks before the beginning of a massive rescue of financial institutions
* Just before six to nine months of the most challenging markets that most investment professionals have seen
Nonetheless, Mendillo showed a cheerful face to the friendly audience containing many fellow CFA charterholders.

Mendillo is cautious about investments because “At this point, uncertainty is a big factor in markets and economies. The short-mid term may be challenging,” she said. It could take many years, she acknowledged, for the size of the Harvard endowment to return to its $37 billion level of June 30, 2008. Still, she noted, the endowment has posted excellent gains since its beginnings, including its growth from only $19 billion five years earlier.

Mendillo’s caution is reflected in the endowment’s actions. “We’re not rushing for the exits. Nor are we rushing to get back into the markets,” she said. Mendillo took pains to correct what she called misperceptions that HMC has sold private equity holdings for “pennies on the dollar.” The firm has made some transactions in secondary markets, but hasn’t taken major chunks out of its private equity holdings, she said.

HMC is taking a more conservative tack under Mendillo. It has cut back its -5% cash weighting to -3% for the first time in decades. Moreover, the portfolio is “seriously in cash,” she said, because she wanted to create more flexibility in the portfolio and make room for new investments.

Where is HMC heading? Mendillo gave some clues, saying
* We continue to be cautious about deploying cash.”
* “If we don’t think we have an edge in a market, we stay out or we index.”
* External management is significantly more expensive than internal management, so if external management doesn’t pay off, HMC will hire a team that can deliver
* The failure of the illiquid portion of the portfolio to be self-funding has “impacted our appetite for further illiquid assets”
* She expects to see very attractive opportunities in real estate, but they may lie a couple years ahead.
* She is very excited about what the firm’s natural resources team has uncovered.

Funds using alternative investment strategies gain steam

/in , , /by

Alternative investments that are less correlated to major market indexes are gathering momentum in the advisor community. Two trends are fueling the movement. First, the sharp market declines since September 2008 have boosted the attraction of strategies that don’t dive along with stock market. “This year, people are looking to dial down risk in their portfolios,” says Bill Harding, director of research at Morningstar Investment Services in Chicago. Second, these strategies are increasingly available to those who don’t qualify as accredited investors (with investable assets of $1 million or more).

Continue reading “Against the Grain,” my article in the March 2009 issue of Financial Planning magazine (free registration may be required for access).

Also, here’s some information that didn’t make it into the article. It’s the list of funds used by the advisors whom I interviewed.

Absolute Opportunities
Absolute Strategies
Arbitrage
Diamond Hill Long-Short
Direxion Commodity Trends
Gateway
Highbridge Statistical Market Neutral
Hussman Strategic Growth
Merger
Nakoma Absolute Return
PIMCO CommodityRealReturn Strategy
Robeco Boston Partners Long/Short Equity
Rydex Managed Futures Strategy

"James Grant: A Positive Lesson from the Great Depression"

/in /by

Great price tags on a number of investments are the silver lining of the current recession, according to James Grant, founder of Grant’s Interest Rate Observer. 

Grant shared his “Thoughts on the Financial Markets and the Current State of the Economy” with the Boston Security Analysts Society on February 11. He spoke at length about the virtues of value investing, as exemplified by the Depression era strategies of Floyd Odlum of Atlas Corporation. Today’s investors can learn from Odlum’s strategy of underpaying for assets, Grant said.

Continue reading “James Grant: A Positive Lesson from the Great Depression,” my article in Advisor Perspectives.

"Institutional investing" isn’t as great as you think

/in , , , , /by

That’s what Van Kampen Investments discovered when it researched how to name a new retirement income product.

“Institutional” means expertise to financial services professionals, but it makes individuals think of hospitals and prisons, said Andrew Scherer, managing director, Van Kampen Investments, in his comments to the Managing Retirement Income conference on Feb. 10.

Van Kampen named its new product “Retirement Strategy Funds” and adopted the tag line “helping you build a better plan” under the influence of research showing that
1. “‘Retirement’ resonated better than ‘Freedom,’ ‘Target,’ ‘Lifetime’ and others.”
2. “‘Strategic’ tested better than ‘automatic,’ ‘institutional,’ or ‘customized.'”
3. “Positive messaging resonates, fear-based does not.”

Can you think of other words that mean different things to you and your clients? Would you agree that “risk” is one of those words? Please leave a comment.

Related posts:
* Highlights from the Managing Retirement Income Conference
* Notable quotes from the Managing Retirement Income Conference


provocative quote about target date fund (TDF) advisers

/in /by

Are target date fund advisers swayed by a conflict of interest?

On p. 41 of CFA Magazine (Jan./Feb. 2009), Mark Ruloff, director of asset allocation for Watson Wyatt Investment Consulting, says, “Advisers…are implementing the glidepath. They might have a bias toward keeping higher equity allocations longer because it helps their own fees…. There are legitimate reasons for advisers to arrive at different glide paths, but there’s the appearance of a conflict of interest.”

What do you think?


Using your client’s house to explain the market

/in , , /by

I like this example of plain talk cited in Eric Rasmussen’s “Who Ya Gonna Call?” in Financial Advisor Magazine (Dec. 2008).

Michael Kresh of M.D. Kresh Financial Planning uses a down-to-earth image, as Rasmussen describes.

To explain the market to clients, he asks them to imagine what would happen if they were forced to sell their house in 24 hours: A home worth half a million dollars would suddenly plummet to about $100K. And that’s just what’s going on with the stock market.

"Making Sense of the Dollar"

/in /by

The U.S. economy is in better shape than you think. It may even start coming back in the second half of 2009, and the dollar will end 2009 higher versus the euro and yen.

At least, that’s the optimistic outlook Marc Chandler, Brown Bothers Harriman’s global head of currency, set forth in his keynote address at NICSA (National Investment Service Company Service Association) East Coast Regional Meeting on January 15, “Making Sense of the Dollar.”

The U.S. will emerge from this crisis stronger than before, just as we emerged stronger from World War Two and subsequent crises, Chandler told his audience.

Continue reading my article, “Making Sense of the Dollar: The U.S. Will Lead the World Again” in Advisor Perspectives.

Take advantage of a 20% discount on the Managing Retirement Income conference

/in /by

You can save 20% on your registration for the conference on “Managing Retirement Income: Creating Solutions to Manage Downside Risk and Adapting Strategies to Preserve Retirement Income in a Shifting Economy” that will be held in Boston, Feb. 9 to Feb. 12.  The discount code should automatically fill when you click on the link above. If not, enter this code:XU2358IW

I’m just passing along this information. I don’t benefit financially if you use the code. But let me know if you plan to attend. Perhaps we can meet during one of the coffee breaks.

New "Wall Street Week" seeking participants

/in , , , /by

Contact Jeff Salkin (jeff AT wallstreetweek.com) if you’re interested in appearing on a new version of  the “Wall Street Week” show.

Here’s what Jeff says:

We are launching a web-based revival of the venerable “Wall Street Week” franchise. We think there’s a need for a higher-level (and lower-decibel) program than CNBC etc. Looking for potential panelists (some of whom will also host the program.) Please email ideas/suggestions to jeff AT wallstreetweek.com


I made the Top Ten!

/in , /by

Well, not me, exactly. My article, “Dan Fuss: The 50-Year Opportunity in Bonds,” made the list of Advisor Perspective‘s top ten most read articles for 2008. 

“Dan Fuss” commanded the #3 spot behind “Jeremy Siegel on Why Equities are ‘Dirt Cheap’” and “Our Interview with Mohamed el-Erian.”

It looks like legendary investors draw readers.