Putnam

Best Blogs of the Week

Posted by Anu Heda on May 14, 2012, in Best Blogs of the Week , tagged with ,

In a week that began with a new French leader and ended with a $2B  headlines, the industry blogs covered a numerous topics. We thought two blogs were particularly interesting.

  • BlackRock – The author tests the adage sell in May and go away in this post.
  • Putnam – This post builds on DALBAR research indicating equity investors under-perform the market because they churn too much. Interesting topic for any FA speaking with jittery clients.

Advisors investing in prop products – strange sounding…

Posted by Anu Heda on Apr 24, 2011, in Thoughts , tagged with ,

Registered Rep chronicled the story of a few Independent Advisors & RIAs starting their own investment vehicles.  A primary selling point is transparency – if the advisor manages the vehicle, he/she can share daily transactions and holdings.

So many asset managers; so many investment vehicles; so many investment strategies – these advisors could not find any investment product that provides the transparency and the strategy they seek?  Naturally, I was a little skeptical.  The virtues of open architecture are well-documented and many providers invest heavily to reinforce those benefits.  So why bother?

Maybe there’s a different play though.  I can think of two investor types that may prefer this:

  • Nervous Nellies – They want to spend their evenings fretting over holdings, performance, and other data points.  For that reason, they like trading in specific equities and even mutual funds.  They may have bought into the concept of alternative investment strategies, but can’t reconcile the opaque nature of hedge funds.
  • Bragging Bills – They want exclusivity at the cocktail party.  An adviser who provides these clients access to some fund without easy access can boast about it.  It’s sort of hedge fund “lite.”  (And this may improve prospecting for the FA.)

Is the advisor unable to find a product or is there value in having a proprietary product in the bullpen?

Is Anything Absolute?

Posted by Anu Heda on Apr 22, 2011, in Thoughts , tagged with , ,

This question occurs as we develop a marketing and sales approach to investment vehicles labeled “to seek absolute returns of …”  There’s a desire for investment providers to sell absolute returns, but I don’t know if there’s an interest in thinking in absolute terms.  Putnam has a set of videos that describe the absolute return mechanics.  They even produce an engaging blog dedicated to absolute return as well.  Does any of this content (or other) convince you to use absolute return investment products?

Humor me and imagine two scenarios –

Scenario 1  – FundCo’s Absolute Return had a 2% return in ’08.

Scenario 2 – OtherCo’s Absolute Return did 20% last year (’10)

In casual conversation among non-professional investors, mismatching years like this is pretty common.  If someone told you about both scenarios, where would be the first place you would go to compare these past results? If you’re like me, you may use Google finance to understand that FundCo was 39 percentage points better than the S&P in ’08, while OtherCo was about 10 better than the S&P in ’10.

My thinking is relative, not absolute.  I understand that these manufacturers are striving to produce a return regardless the direction of financial markets.  That’s a difficult frame of reference to set with prospective investors.  Professional investors provided with different funds’ returns for the same year typically look at each fund relative a relevant benchmark.

So while I haven’t seen anything compelling yet, I realize we’re still in the first act for absolute return products.  There’s a long way before the show is over.  Yet thus far, it’s not been very convincing.