2012-11-14 17:28:58 -
To protect and maximize wealth, private wealth managers should focus on asset allocation, as results are primarily driven by that and not by manager performance, advised Duncan Rolph, Partner, Miracle Mile Advisors. Dynamic asset allocation that can change with market conditions and client objectives is what works best in a volatile environment, he added.
A speaker at the upcoming marcus evans Private Wealth Management Summit Fall 2012, in Las Vegas, Nevada, December 2-4, Rolph shares his thoughts on dynamic asset allocation and how to invest in the current market environment.
- What are investment results driven by? How can private wealth managers maximize returns for clients?
The largest contributor to long-term results is asset allocation and in a more volatile environment, it should
be dynamic. An investment portfolio should be a work in progress that constantly seeks to optimize risk and return within the framework of an individual's or family's investment objectives.
- How should asset allocation strategies change with different market cycles?
Historically, investors have had a static approach with asset allocation. They would create an allocation for a client and use it over multiple years and market cycles. This line of thought has been called into question since 2008. With large swings in volatility that may span several years, the timing has becomes substantially more important to long-term results. Private wealth managers have to focus on creating an allocation that is dynamic, and that can change with market conditions and client objectives.
Investors are struggling to understand how to invest in what has become a very uncertain market. Capital markets have really globalized, which can upend certain asset classes very quickly. On top of that, the availability of investment vehicles has multiplied exponentially, making their jobs a lot more difficult. Many advisers have also relied heavily on more illiquid investments such as private equity, hedge funds, and real estate that have simply failed to perform in recent years as macro events have driven markets.
Fees are also becoming more important in today's lower return environment and can account for a large chunk of a client's expected returns which means advisers must take more risk to achieve a similar net return to an indexed portfolio.
- Why do Exchange Traded Funds (ETFs) and Index Funds make more sense in this environment? What value do they add to a portfolio?
ETFs have many benefits. Unlike hedge funds or private equity funds, they are more liquid and can be more reactive to market conditions. That is a very simple but powerful benefit. They are also completely transparent. Investors need to know what they are getting themselves into, but with hedge funds they do not know what they have invested in until they look back 30 or 60 days.
ETFs are also tax efficient and fee efficient vehicles and tend to be much less expensive than their actively managed counterparts. They have also have performed exceptionally better with less than 30 per cent of the portfolio managers in the S&P 1500 outperforming the index over the past three years. I expect that trend to continue in the post-2008 environment.
About the Private Wealth Management Summit Fall 2012
This unique forum will take place at the Red Rock Casino, Resort & Spa, Las Vegas, Nevada, December 2-4, 2012. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on the global economic outlook, family governance structures, sustainable wealth management and succession planning. For more information please send an email to email@example.com
or visit the event website at www.privatewealthsummit.com/DuncanRolphInterview
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