WebEx Replay (Part 1) – Managed Volatility: An Introduction

Posted on January 18, 2014 by mboggio

MANAGING VOLATILITY IN CLIENT PORTFOLIOS

* What are Managed Volatility strategies?
* Why are ETF Portfolio Strategies HOT?
* How do I “intelligently diversify” my clients?
* How can I participate up & protect down?
* Is the Risk Managed Core Diversifier right for my clients?

WHO SHOULD ATTEND:
RIAs, Advisors, Institutions, Insurance Companies, Pension Funds, Family Offices, Broker Dealers

Host: Michael Boggio – Chief Investment Strategist
Sponsor: IronGate Investment Management
Duration: 30 minutes

2014 – The Fed & Bubble Risk – Volatility Needs Guardrails

Posted on January 9, 2014 by mboggio

Yesterday’s (1/8/14) WSJ article regarding the Fed watching for asset bubbles should be taken as a yellow flag that company earnings will need to catch up to the 2013 multiple expansion. Coupled with the beginning of Fed tapering, the economy and equities will be required to stand more on their own fundamentals.

Many consider May of 2013 to have been a trial ballon for the Fed to see how the markets would react to tapering. Regardless, given the bond markets reaction to the whisper of tapering we should expect rates to continue their move higher, and thus increased volatility in 2014. But the question remains, how fast will rates rise and will that benefit equities, given last years multiple expansion, and given the scheduled reduction in stimulus?

Historically, diversification has proven to be is a good first line of defense in portfolio management, during periods of heightened volatility. But recent history has also reminded us that in fast markets, correlations move toward one, and the benefits of diversification can disappear. Therefore, additional layers of risk management need to added for drawdown protection.

Different types of drawdown protection have varying costs to hedge a portfolio. In our opinion diversification and being tactical can provide the most cost effective drawdown protection available.

To learn read the white paper: Intro to Managed Volatility Strategies: Why Now, Who Benefits, Who Doesn’t & How Do They Work?

Fed Minutes: Bubble Risks Drawing Attention – WSJ.com online.wsj.com

Minutes of the Federal Reserve’s December policy meeting showed most officials supporting a pullback in the central bank’s bond-buying program.

Be Tactical…The Market is Always Right

Posted on January 4, 2014 by mboggio

At the start of the new year, everyone wants to release their 2014 predictions for the “I told you so” moment at year end. If they are wrong – no one has a crystal ball; but if they’re right – then open the doors assets should flow in. Pardon my sarcasm, but the games that asset managers and the media play are often nebulous at best due to the lack of accountability.

The attached video clip mentions GMO that suggests a 20% allocation to emerging markets due to their 7 year asset class forecast. While their analysis is rooted in thoughtful research, this type of investment model is still predictive in nature, and highly dependent on the accuracy of the forecast. In full disclosure, I often read Jeremy Grantham and have great respect for him and his firm but I prefer reactive models for investing.

Reactive models are not biased by forecasts, can adapt to the flow of information more quickly, can sort through the noise of the markets and its headlines, and can help remove the emotions from investing.

Most importantly, reactive models can be useful in determining how much to invest in emerging markets. In a year like 2013 when emerging market equities underperformed US equities by 35%, setting a fixed allocation to emerging markets is difficult for both professional and individual investors, especially if the allocation is sizable.

If the goal is to build a globally diversified portfolio across asset classes, then the allocation decision to emerging market equities becomes more complex as you add more asset and sub-asset classes.

As mentioned above non-core exposures, such as emerging markets, can underperform significantly, and 2013 was a prime example. To solve for this problem we prefer investment models that can pivot, toward core-holdings, such as US equities. For this reason and more, reactive models can be more tactical in their allocation weighting to emerging markets. In other words, you don’t have to decide how much EM, let the market and the (reactive) model tell you. You just need to courage to listen.

For more information visit: http://www.ManagedVolatility.com