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Paper Explores How Liquid Alternatives Can More Effectively Diversify A Fixed Income Allocation

A “Blue Paper” titled It’s all About your Core from Pioneer Investment’s Thomas Swaney discusses how traditional diversified fixed income strategies may offer investors lower benefits than they think and that there may potentially be “equity-like risk” in non-treasury fixed income asset classes. Specifically, Swaney cites research showing that various asset classes within the fixed income space may have higher correlations to equity markets and investors must truly understand these risks within their portfolios.  In times of...

Gloomy 7 year outlook predicted for bonds

Jonathan Mackay of Morgan Stanley Wealth Management sees annual returns in the 1-2% range for investment grade bonds for the next 7 years, which correlates into a negative real return forecast when taking into account inflation. He goes on to suggest/recommend that investors hold a smaller allocation to bonds than in previous cycles.   Also yesterday, Bank of America’s Michael Hartnett reported that 45% of all government bonds worldwide now...

Target Date Funds aren’t right for every 401(k)

A recent article that appeared on CNBC.com titled “Don’t let your 401(k) retire before you do” highlighted some of the reasons that TDFs may not be a good fit for all plan participants, including: There is not uniformity among TDFs as to their asset mix, which can change unexpectedly Individual investors may have unique circumstances that may not fit the “one size fits all” approach Know what the fund managers...

New Collective Investment Fund Brings Endowment Investment Philosophy^TM/Liquid Alternatives to Defined Contribution Plans

APPLETON, WIS. — Alta Trust Company has partnered with ETF Model SolutionsTM, LLC. to launch the Endowment Collective Fund (CUSIP: 26923F105). The Endowment Collective Investment Fund (CIF) seeks to improve risk-adjusted returns of traditional two-dimensional portfolios of stocks and bonds by adding alternative investments, such as private equity, hedge strategies and real assets to create a 3-dimensional portfolio. Managers of university endowments, pension, and defined benefit plans have historically utilized lower-correlated alternative...

More Data Shows That Few Active Mutual Fund Managers Beat the Market

A recent article summarized data from a paper in the Financial Analysts Journal on the career paths of mutual fund managers. Not surprisingly it confirms most mutual fund managers of any tenure “generally do not outperform the market or their style benchmarks and do not display consistently superior performance.” “Even long-term managers show no ability to beat the market on a risk-adjusted basis.” Daniel Fisher, the author of the...

Why Endowment Funds Like Yale’s Are Doing Just Fine

The Ivory Tower geniuses atop the country’s most respected endowments have recently received a firestorm of criticism for failing to produce outsized returns during the current bull market. But investors must accept that all investment strategies experience periods of underperformance and it’s hardly a reason for endowments to hang their heads. Investors tend to have short memories and forget that these same endowments outperformed the stock market over the...

List of Best and Worst 401(k) plans

Check out the following link with the above listing. Surprised to see Facebook ranked at the bottom! http://www.bloomberg.com/visual-data/best-and-worst/best-401-k-plans-companies (Source: Bloomberg)  

3 Big Shortcomings of Target Date Funds

Asset growth in Target Date Funds (“TDFs”) in defined contribution plans has been phenomenal the past few years, primarily because the trend in plan design features such as automatic enrollment and being deemed qualified default investment alternatives. Respondents in a Callen Associates survey indicated that the total percentage of defined contribution plan assets in TDFs as of 12/31/2013 was 21.12%, second only to large-cap domestic equity (23.7%)  This compared to 15.7% and 23.0%, respectively,...

Understanding Fiduciary Protection from Retirement Plan Service Providers

Employers of defined contribution/401(k) and defined benefit must fulfill certain obligations and adhere to standards of conduct under ERISA rules with respect to the defined contribution and/or defined benefit plans they establish.  These obligations can be completed by internal staff through an administrative committee or through the human resources department.  However, in many cases, employers hire outside professionals (sometimes called third-party service providers).  Regardless of who fulfills the obligations,...

Morningstar May Fund Flows Reports Highlights Switch From Mutual Funds to Collective Investment Trusts

In Morningstar’s U.S. Open-End Asset Flows Update for June, Michael Rawson, CFA highlights a growing trend of asset flows from active mutual funds to Collective Investment Trusts (CITs).  In the article, Michael cites costs as one factor, but there are other advantages that CITs have over mutual funds that we’ve mentioned before, including additional fiduciary protection for the Plan Sponsor. An interesting statistic Mr. Rawson quotes is that market share...