Relative Value Analysis – The Anatomy of an Investment Decision

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Summary

  • We have increased the amount of emerging markets exposure we have allocated within client equity allocations.
  • We do not vary portfolio weights much from the broad equity and fixed income asset allocation targets we agree to in the investment policy statement we establish with clients. Instead, we vary underlying “sub-asset class targets” in portfolios based on the outcomes of our research and relative value analysis.
  • Our relative value analysis is a means of comparing the characteristics of a sub-asset class grouping to its own history, to other sub-asset class groupings and to forward expectations to determine if it is attractively valued.
  • Our opinion on emerging markets is based on a mosaic of economic, currency and growth fundamentals, as well as valuation levels and examination of historical performance cycles.

Manager Research – The Anatomy of an Investment Decision

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Summary

  • We will always have active and passive strategies in client portfolios. However, the percentage allocated to any investment type will vary over time.
  • We believe we may have entered a transition period where the environment is becoming more favorable for active managers to outperform their passive counterparts.
  • The most common, value-destroying behavior we witness on a regular basis is “recency bias.” This refers to the belief that whatever happened in the recent past will continue in the future.
  • Investing in active managers is not simply a contrarian exercise and cannot can be determined solely by a review of charts.
  • In summary, be mindful of cycles – they’re everywhere! Don’t chase performance, be patient, invest for the long-term, stick to the process and know your investments.

Hiring an Advisor – Do Your Homework

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Summary

  • Hiring an expert to do a job does not mean we get out of homework, it just means we get out of the actual work.
  • In just about every profession most people have different skill sets, experience levels and motivations.
  • Take the time to effectively interview the person you are looking to hire. And take the time to know what to ask during the interview.
  • At Entasis, we know these decisions are hard. We know they take time. And we know it is sometimes hard to know where to start. We have created a tool to help.
  • Click here for a copy of our Financial Advisor Questionnaire. We have filled this out already. Please contact us for a copy of ours.

MoneyLife Show – August 11, 2016 with Mike Peters

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Topics Covered

  • Review of Entasis core beliefs and fixed income investment process
  • Discussion of interest rates
  • Perspective on BlackRock Strategic Income Opportunities – BSIIX
  • Perspective on Templeton Global Bond – TGBAX
  • Review of Entasis sell criteria
  • Audience questions

A full copy of the MoneyLife Show can be found at http://moneylifeshow.com/archives.asp

Goals-Based Planning – Is it a free pass for your advisor?

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Summary

  • In theory, goals-based planning for clients makes a lot of sense. Make long-term goal achievement a priority relative to account performance.
  • Our concern is that the original intent of goals-based planning has morphed into a potentially self-serving interpretation for some financial representatives.
  • We believe the financial advice industry still needs to make significant strides towards better transparency for client account performance against a suitable benchmark.
  • Many things can be gleaned when performance is examined relative to a benchmark such as fees, suitability of investments and alignment of stated goals relative to portfolio structure.
  • Good or bad, your advisor “owns” the performance of your investment portfolio.  Ask questions and demand thoughtful answers.  Don’t give them a free pass.

Research Matters – In House Research

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Summary

  • Entasis Asset Management is an investment firm founded by investors.  All founding partners have earned the right to use the Chartered Financial Analyst (CFA) designation.
  • We believe conducting investment research in house is a significant differentiator and the article provides support for that viewpoint.
  • Additionally, we believe that the individuals managing portfolios should also be the individuals conducting detailed “boots on the ground” research on individual investments.
  • Research takes experience, a monetary investment and patience.  Unfortunately, many firms do not have the ability or inclination to make research a central part of their offering to clients.