Ken Burns on Jackie. Robinson; The Best .... tive effects of an economic recession and heightened volatility. ... short-
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India’s Oldest Game Goes Pro; An Interview with NBA Commissioner Adam Silver; Peter Guber on Sports Tech
The Race to Be the World’s Top Sport; 2015’s Biggest Art Sales; How to Start a Sports Philanthropy
Ken Burns on Jackie Robinson; The Best Sports Watches and Spas; Should Your Child Play Football?
THE EVOLUTION OF FINANCIAL INTELLIGENCE
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VOLUME 25
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EDITION 01
L E A D I N G W E A LT H A D V I S O R
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NEW YORK, NY
What is “tactical” asset allocation, and why does it matter? B Y F I E L D P O I N T P R I VAT E
Top row, left to right: Andrew Heitner, David Zoll, Thomas Haug, Nicholas Bertha, Andrew Randak, Jill Arkwright Harvey, Richard Arkwright; bottom row, left to right: Nicole Bonica, Allen Jacobi, Thomas Hakala, Thomas Conway, Taylor Gray, Ross Peet
FIELDPOINT PRIVATE
400 Park Avenue, 18th Floor, New York, NY 10022
TEAM New York, NY Office Managing Directors, Senior Advisors: Andrew Heitner, David Zoll, Thomas Haug, Nicholas Bertha, Andrew Randak, Jill Arkwright Harvey, Richard Arkwright, Nicole Bonica, Allen Jacobi, Thomas Hakala, Thomas Conway, Taylor Gray, Ross Peet ASSETS UNDER ADVISEMENT $3.1 billion ASSETS UNDER MANAGEMENT Available on request
LARGEST CLIENT NET WORTH $1+ billion FINANCIAL SERVICES EXPERIENCE 300+ years (combined) NUMBER OF CLIENTS 500
212.365.7600
PROFESSIONAL SERVICES PROVIDED Planning, investment advisory services and investment products EMAIL
[email protected] WEBSITE www.fieldpointprivate.com
COMPENSATION METHOD Asset-based fees and commissions (investment products) PRIMARY CUSTODIAN FOR INVESTOR ASSETS Pershing
ILLUSTRATION BY NANCY JANUZZI
FIELDPOINT PRIVATE
N Nestled in the investment process between long-term strategic asset allocation and the ultimate selection of securities sits the critical step of short-term “tactical” asset allocation. Often called “tilts,” these adjustments are rarely in the spotlight and often the most subjective part of investing. But, with the proper analytics backing them, they can be a powerful differential in the risk and performance characteristics of your portfolio. Tactical Asset Allocation In a sound investment plan, your strategic asset allocation is like the road map for a long trip. However, even the best road map can’t account for changing
traffic and weather conditions, potholes and detours. In investing, you need to make similar, ongoing adjustments; this is the role of tactical allocation. Tactical allocation is intended to account for the inevitable short-term (6 to 12 months) shifts in economic and market conditions, due to factors like interest rates, inflation, employment and wages, debt, return and yield expectations, currency trends and more. These elements are eminently quantifiable; however, it is our observation that tilts are too often based on thematic, qualitative views of the trends—too much art and
associated with the late stages of an economic cycle or the early transition out of a recession into a new cycle. During turbulence, it is tactical tilting’s job to “chop off the legs” of a potential market downdraft by mitigating the destructive effects of an economic recession and heightened volatility. This is the investment equivalent of parking under an underpass as a hailstorm nears, and would indicate shifting a material portion of the strategic equity allocation (up to half) out of stocks and into fixed income and/or cash. The second step involves assessing the
If you can ‘chop the legs off’ steep drawdowns when markets are poor, you will begin the subsequent recovery at a higher starting point. not enough science. Perhaps this lack of methodological rigor explains why clients often ask, “Why bother with tactical asset allocation? Aren’t I better off just buying and holding?” (potholes be damned.) So, here’s why: We believe that effective, methodologically sound tactical asset allocation should deliver, over long periods, excess returns over the policy benchmark of approximately 100 basis points (1 percent incremental return per year, net of expenses and transactional costs). And, here’s how: The first step should start with adjusting the portfolio for the prevailing market risk regime—which is a binary designation, either “quiet” or “turbulent.” Quiet periods tend to be associated with the early and middle part of an economic cycle. Turbulent periods tend to be
ABOUT US
F
IELDPOINT PRIVATE IS A BOUTIQUE WEALTH ADVISORY AND PRIVATE BANKING FIRM ESTABLISHED IN THE EARLY DAYS OF THE FINANCIAL CRISIS BY 31 INDIVIDUALS, INCLUDING FORMER CHAIRMEN AND CEOS OF SOME OF THE
MOST WELL-KNOWN AND SUCCESSFUL FINANCIAL AND CONSUMER FIRMS IN AMERICA. Their intent was not to craft a firm that would emulate the large, established institutions, but one that could serve as an unconflicted alternative: a boutique fully dedicated to clients with complex needs. Fieldpoint Private has roughly $3 billion in assets under administration and more than 60 employees across offices in New York City and Greenwich, Conn. To learn more about Fieldpoint Private, watch the firm’s story here: www.fieldpointprivate.com/founders-video. l
relative attractiveness of the portfolio assets (class, segments, countries and sectors) based on valuation and momentum. This utilizes an extensive body of research by academicians and practitioners who have found that while stocks and bonds generally have negative correlations, diversification benefits increase when the stocks and bonds are screened and selected based on these two factors. Each quarter, one can rank the various assets (classes, segments, countries and sectors) based on their value (tilt risk toward assets that are two standard deviations cheap and away from assets that are expensive) and their momentum (tilt risk toward assets with positive momentum and away from assets with negative momentum). By doing this, you may help capture short-term momentum effects (ride the winners). By avoiding negative momentum and overvalued assets, you may further protect yourself on the downside. Finally, the process aims to participate in market reversals by investing in deeply discounted situations. If you can “chop the legs off” steep drawdowns when markets are poor, you will begin the subsequent recovery at a higher starting point than if you had stood still during the carnage. And if, when markets recover, you can identify the asset classes that have been most deeply discounted, and those experiencing the most momentum, you may enhance your opportunities during updrafts. l
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Andrew Heitner Managing Director, Senior Advisor
David Zoll Managing Director, Senior Advisor
Thomas Haug Managing Director, Senior Advisor
Nicholas Bertha Managing Director, Senior Advisor
Andrew Randak Managing Director, Senior Advisor
Jill Arkwright Harvey Managing Director, Senior Advisor
Richard Arkwright Managing Director, Senior Advisor
Nicole Bonica Managing Director, Senior Advisor
Allen Jacobi Managing Director, Senior Advisor
Thomas Hakala Managing Director, Senior Advisor
Thomas Conway Managing Director, Senior Advisor
Taylor Gray Managing Director, Senior Advisor
Ross Peet Managing Director, Senior Advisor
Fieldpoint Private 400 Park Avenue, 18th Floor New York, NY 10022 Tel. 212.365.7600
[email protected] www.fieldpointprivate.com
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THE EVOLUTION OF FINANCIAL INTELLIGENCE
Fieldpoint Private is featured in Worth 2016 Leading Wealth Advisors , a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a publication of the Worth Group LLC, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of the Worth Group LLC. ®
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