News Mentions & Press Releases
When a recent CFA Institute survey revealed that only one in five CFA charter-holders are female, I wasn’t surprised. As a female portfolio manager, I’m often one of the only women in the room.
While CLS works hard to make sure we have a diverse team, and I work with fantastic, forward-looking male colleagues and partners across the nation, I’d love to see the number of my female peers increase in the industry.
Numerous studies have revealed female leadership in corporate America as a whole is lackluster. Women only represent 5% of CEOs, 19% of board members, and 25% of executive and senior-level positions across multiple corporate sectors. Despite decades of progress, global corporations still have much work to do. But, why should investors care?
The rise of ETFs has generally come at the expense of active management, primarily via mutual funds. For years, active managers have been under fire as an increasing amount of research has determined that a manager’s performance is largely driven by a function of beta, or risk factors, rather than unique alpha.
BlackRock’s CEO Larry Fink summed this up well in a recent interview with Bloomberg noting, “One thing you have to understand related to the growth of ETFs is that a large component of the growth is not people seeking beta; it’s active managers navigating beta for alpha.”
Smart beta ETFs aim to take passive investing one step further by applying a rules-based approach to replicate decisions made by active managers. This has certainly been true with the rise of multi-factor ETFs such as LRGF, TILT, GSLC, JPUS, and JHML, just to name a few.
Early in his career, Rusty Vanneman worked as an analyst, manager and product manager at Thomson Financial in a group called Technical Data, which was eventually re-branded Thomson Global Markets. It provided real-time market analysis on primarily fixed income and currency markets for traders around the world, primarily over machines such as Telerate and Knight-Ridder (tools that Bloomberg eventually vanquished).
From there, Vanneman went on to Fidelity Investments, where he was a senior research analyst. In the 1990s, Fidelity started a group called Strategic Advisors to manage a variety of products, including their repurposed mutual fund wrap, Portfolio Advisory Service, to start including non-Fidelity funds into the portfolios.
“This required a high-quality, institutional due-diligence effort, and I was fortunate to be a founding analyst who was heavily involved in establishing the group’s investment methodology,” Vanneman said.
Robo advisers’ efforts have been aimed largely at the retail investor market, but given the estimated $7 trillion held in defined contribution plans, it’s not surprising that robo vendors are also looking to serve plans and plan consultants. My previous column on robos discussed Betterment for Business’s offering; other vendors also are targeting the market with different twists to their automated services.
Eye on the Goal
Unified Trust Co. in Lexington, Kentucky, has offered plan participants digital advice since 2009, according to founder and CEO Gregory Kasten, M.D., CFP. Several goals drove the service’s development. The first was a search for a scalable platform that would allow advisors to effectively and efficiently serve large numbers of plan participants. Kasten cites the example of a plan consultant serving five plans with 100 participants each. “When you work it down per person, the advisor basically has about 15 or 20 minutes a year to spend with each participant,” he says. “So, it’s almost an impossible job to try to figure out what their goal is, how much is their retirement going to cost, are they on track, what things need to be done differently.”
The second objective was to incorporate an income replacement approach versus the prevalent focus on participants’ portfolio allocations. The goal is to “replace 70 percent of their income as near as possible to their Social Security normal retirement age,” Kasten explains. Working back from that goal, the analysis considers retirement plan savings rates, anticipated savings rate escalations and investment allocation to determine whether the participant is on track for fully funding the goal. This approach directly addresses the likelihood of adequate retirement income sources, something other methods overlook, Kasten maintains: “(If you) just build the portfolio in the absence of a goal, in the absence of the proper savings rates, in the absence of the asset-liability funded ratio, quite frankly, it’s pretty useless.” Plan advisors and consultants currently account for 80 to 90 percent of Unified Trust’s new business, he estimates.
Stars are doled out on a curve; 10% of funds in any given category get five stars; 35%, three stars; and 10%, just one. Longer time periods are weighed heavier. The rating, of course, can’t tell you if the manager who earned that record has left, or if a promising new manager is turning things around.
The ratings also factor for risk, but lower risk isn’t always better. “You should be taking the appropriate amount of risk,” says Rusty Vanneman, the chief investment officer of Omaha, Neb.–based CLS Investments. “In a bear market, for example, the funds that pop up as five star will tend be lower-risk. If you rotate to those five-star funds, you may not have enough risk to participate in the recovery.”
Star ratings are a reflection of past results, which aren’t predictive of future returns. Of the 827 funds that had five-star ratings 10 years ago, just 45% still have a five- or four-star rating today. Of 469 funds with one-star ratings a decade ago, nearly half are rated one or two stars today, while 14 have five stars.
Investors amped up their bets on the fixed-income market during the latest week, adding cash to U.S.-based taxable-bond funds for the 17th straight week, Investment Company Institute data showed on Wednesday.
The move into U.S.-based bond funds, which has lasted more than a year, comes despite a risk of rising U.S. interest rates and as the Federal Reserve incubates a plan to cut its cache of bond holdings this year.
Fixed-income funds attracted $7.6 billion during the seven days through March 29, the trade group said, including $7 billion in taxable-bond funds and the remainder in municipal debt.
The Federal Reserve (Fed) is predicting two more rate hikes in 2017, and that has many investors weighing the potential pros and cons of a rising rate environment. But, there are many reasons to believe interest rates could fall.
The stock market is overvalued, and currently in a mature bull market, so it could easily correct. Uncertainty over fiscal policy in the Trump administration could sink inflation expectations, and the economy could certainly slow. Global rates remain lower than domestic rates, and investor sentiment is so one-sidedly negative right now, it might not take much for rates to start falling.
So, if they do, are your portfolios prepared? Below are six tips to help you be ready for whatever direction rates may go.
Currently, there is approximately $45 billion invested in alternative ETFs, according to Morningstar – just 2% of total ETF assets. Investors have been slow to adopt these products. In some cases, their hesitance is for good reason, but in others, it stems from a lack of understanding and implementation guidance. There are a number of reasons alternative ETFs have been avoided during their limited history; however, those reasons may face strong resistance going forward.
Since the 2008 financial crisis, there has been a consistent trend of positive bond and stock returns, with only a few years suffering major declines. Because of this, investors have had little reason to stray from traditional asset classes into the abyss of alternative products, let alone relatively new alternative ETFs. However, along the way there have been some glimmers of hope that may provide insight into the future.
- International investing is currently quite attractive.
- A global trade war benefits no one.
- High tariffs rarely achieve their aim (even if it’s a commendable one).
The global markets are valuable diversifiers that support longer-term stability in returns. Foreign markets also represent roughly half of the world’s market capitalization and about three-fourths of the world’s GDP, which is not the type of growth investors want to miss out on.
Currently, international investing happens to be especially attractive as international market valuations are trading at a significant discount relative to the U.S. market, given strong U.S. outperformance since the 2008 financial crisis. But, it’s important to remember that markets are cyclical in nature and performance leaders change frequently.
OMAHA, Neb., March 16, 2017 /PRNewswire/ — CLS Investments, LLC (“CLS”), a third-party money manager and a leading manager of exchange traded fund (“ETF”) portfolios, has announced the release of “Higher Calling: A Guide to Helping Investors Achieve Their Goals,” written by Rusty Vanneman, Chief Investment Officer at CLS. The book was written as a guide to help advisors with a significant challenge — keeping investors on track despite market volatility, media noise, bubbles and bursts.
“Being an advisor is more than simply providing advice to clients. Ensuring investors are achieving their long-term goals against the pull of emotion is advisors’ number one priority, and this books sets out to help them bring their clients one step closer to achieving their financial goals,” said “Higher Calling” author Rusty Vanneman. “Advisors have an obligation to treat clients as if they were our own family and ensure they are making the right decisions, despite market forces and volatility. ‘Higher Calling’ aims to provide the advisory community with the insights needed to help both them and their clients succeed.”