We’re pleased to formally announce our new Relative AlphaTM strategies and globally diversified investment approach.
As we have designed and incubated these strategies and approach over the past few years, our conviction has grown to the point where our Chief Investment Officer has invested 100% of his family’s equity investments in Relative AlphaTM strategies.
In Preston’s words, “the evidence is robust, over multiple market cycles, which makes it an easy choice for our clients and my family.”
Relative AlphaTM funds consistently produce alpha in both up and down markets relative to their peer groups1,2 and provide full transparency, daily liquidity, and remarkable tax efficiency.
In addition, they are available for very low fees as compared to other funds in their peer groups.
Long-Term Consistency of Relative AlphaTM
As an example, outside research shows that Relative AlphaTM indices, which these fund track, outperformed the following percentages of peer group funds for the trailing 15-year period ending 12/31/183:
More complex strategies are available in the marketplace, and we appreciate how they are created and positioned. As past senior executives of large investment houses, the founders of FWP helped develop, present and implement many intricate and tactical approaches.
However, when looking at how a globally balanced portfolio of Relative AlphaTM funds has performed as compared to what many consider to be the most complex and most thoroughly resourced and researched strategies in the world, top quartile U.S. Endowment and Foundations, we found the following:
A globally diversified Relative AlphaTM fund portfolio ranked in the top quartile of all US Endowments and Foundations for every single rolling 10-year period from 2010 – 2018, which represents a period that starts back in 20002,3.
We are proud of our approach and look forward to making the advantages of Relative AlphaTM available to both individuals and institutions in an investor friendly form that is low cost, completely transparent, completely liquid, tax efficient and easy for all investors to understand.
For more information on Relative AlphaTM and how we can customize approach to meet your goals and objectives please call Preston McSwain or James Cornell at 617-602-1900.
What types of funds make up our Relative AlphaTM approach?
Index funds or what some call passive investing.
Yes, beyond describing the types of funds that we use to implement portfolios like the one we highlight above, we are having a little fun with the use of the word “passive.”
According to the dictionary, “active” means “vital” and “dynamic’ and has synonyms such as “hard-working”, “diligent” and “effective.”
By contrast, the word “passive” means “inert” and has synonyms such as “docile,” “acquiescent” and “compliant.” Its literal antonym is the word ‘active.’
Humans are hard-wired to be attracted to people and things that are vital. It’s a Darwinian survival instinct. We are also generally competitive and socialized to place a premium on people and processes that are diligent and effective (active).
Translating this to investing, pause a moment. How do you feel when you hear that certain types of investors are called Passivists? Chances are, not so great.
One of our favorite quotes about this comes from a talk we heard Charles Ellis give at an investor roundtable. For those of you who don’t know Charlie, he has interviewed hundreds, if not thousands, of professional investors in his role as the founder of Greenwich Associates, a leading institutional investment consultant. In addition, he evaluated many investment managers as the chair of Yale’s investment committee for nine years alongside David Swensen.
Ellis was asked: ‘What is the biggest risk investors face when investing in index funds?’
His answer? “Being called passive.”
Yes, regardless of your investment background, deep down you are likely to be more attracted to an investment or firm that sounds dynamic and vibrant versus one that sounds docile and inert.
Investors such as Warren Buffett, say that it wise to focus on a simple, long-term approach (yes, the boring turtle often beats the hare) and by trademarking the term Relative AlphaTM we are trying to change the way index investment approaches are perceived.
The next time you hear an investment professional downplaying or even beating up on index funds or strategies that employ with phrases like this, which we’ve heard many time before (“they don’t strive for excellence” – “don’t you want to have alpha and strive to be the best” – “it is risky to take a passive approach”, etc.) consider saying this:
I’m investing in a strategy that produces consistent alpha relative to the majority of funds. The strategy is fully transparent, liquid and tax efficient.
My bet is that they will want to hear more and that, if you wanted, you could charge a lot for it.
Many say that all investing is relative to other alternatives (opportunity cost or benefit of one choice over another, etc.).
If this so, I know of only one category of strategies that has produced consistent Relative AlphaTM: Index ETFs and funds.
The wonderful news is this exact approach is available today.
3. The Relative AlphaTM Sample 60/40 Global Portfolio consists of the portfolio detailed in the following aTrust & Estates article, rebalanced one a year to match the fiscal June 30 year end of endowments: Keep It Simple .