Posts Tagged ‘Investment Advisor Monitoring’
When to Fire an Investment Advisor
Question: When, if ever, should a business manager recommend that their client fire their investment advisor? Answer: It will be time for your client to part ways with their investment advisor when, over a protracted period of time, the investment advisor has been unable to accomplish the job they were hired to do. The problem…
Read MoreDuty to Monitor the Total Return of a Trust Portfolio
Statutory Considerations: Section 2(c)(5) of the Uniform Prudent Investor Acts directs that “Among that a trustee shall consider in investing and managing trust assets are… the expected total return from income and the appreciation of capital;” In response to this duty, a prudent trustee will adopt a policy in which the total investment return for…
Read MoreERISA §404(a)(1)(B) re Duty to Balance Risk and Return
Trustees are required to make hard investment decisions. They are to take into consideration the risk of loss and the opportunity for gain associated with each particular investment or investment course of action. ERISA trustees are required to balance the risk and return of each investment decision under conditions of uncertainty. Because ERISA trustees do…
Read MoreDoes Size Matter?
Do “big investors” have better investment results than “small investors”? Many business managers expect that their wealthy clients with large portfolios ($25m+) should have better returns because the clients have access to the best and brightest members of the investment industrial complex. Many business managers believe that size does matter. Based on our experience of…
Read MoreA Business Manager's Duty to Monitor the Risk and Return of their Clients' Investment Portfolios
The Problem: You are a business manager and it is either explicitly or implicitly the case that you are responsible for monitoring the activities of the investment managers that have been entrusted with your clients’ capital. (If you are not a business manager or disagree with this statement, stop reading. This paper does not apply…
Read MoreTrust But Verify: Do Private Equity and Hedge Funds Deliver Superior Risk-adjusted Returns?
For several decades, the investment industry has promoted the virtues of hedge funds and private equity funds for large instructional investors and ultra high net worth individuals. But over the last few years these products have come under increased scrutiny because the hoped-for benefits have, for the most part, not materialized. A report in April…
Read MoreUPIA §2(b) – Duty to Monitor Risk and Return
The preamble to the Uniform Prudent Investor Act notes, “The tradeoff in all investing between risk and return is identified as the fiduciary’s central consideration.” For most trustees determining the return that was produced by the assets held in trust is a fairly straightforward exercise.
Read MoreA trustee’s duty to establish return objectives or “Don’t be a lemming”
Duty to Establish a Target Return: Section 2(b) of the Uniform Prudent Investor Act directs, “A trustee’s investment and management decisions… must be evaluated… as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.” A prudent trustee would not hire an employee without describing at some level…
Read MoreIs your client’s investment advisor better than average?
Vanguard vs. Client: The Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is (1) well diversified (60% global stocks and 40% bonds), (2) inexpensive (0.15% per year), (3) has a long and successful 20-year track record, and (4) is really big ($15b). How does your client’s moderately allocated portfolio with a similar risk and return profile compare…
Read MoreThe Emperor Has No Clothes
The investment industrial complex does not want you to know how to evaluate its members. If it did you would have easy access to the following data: Each investment advisor would establish a target rate of return that could be measured against in future years. Each investment advisor’s portfolio would be compared to several reasonable…
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