Asset Management

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       Overlay Management: The Whole Product Solution? by Steve Winks. The only constituency of financial advisor who continues to grow their business at a double-digit clip is the 12% of advisors who are capable of addressing and managing a broad range of investment and administrative values for an on-going advisory fee. Yet, adding value requires a skill set that the vast majority of advisors do not possess. So how does the industry empower all financial advisors to add value? Overlay management interjects a third level of asset management, complementing that of the money manager and the advisor, which addresses and manages portfolio detail at the client level, e.g., risk, return, tax efficiency, liquidity and cost structure, not possible by money managers and beyond the technical expertise of most advisors. The advisor does not have to be a tax virtuoso to understand and deliver the benefits of tax-efficient portfolios made possible through the expertise and proprietary expert systems of an overlay manager. Overlay managers like Parametric and Placemark may well be the vehicles that empower financial advisors to address and manage a broad range of investment and administrative values not otherwise possible, putting the industry and its advisors back on track again for positive earnings and revenue growth. (Download the article in pdf format with graphics or for a faster download, in pdf format without graphics.)

       Overlay Portfolio Management in a Multi-Manager Account by David M. Stein, Ph.D., Parametric Portfolio Associates. Parametric Portfolio Associates has pioneered the concept of overlay management. In this article, David Stein, chief investment officer of Parametric, explains the role of the overlay manager, establishes the values they address and manage, the methodologies and technologies they use to do so, quantifies the value added and provides insight into how one can even more dynamically improve portfolio performance using overlay management. (Download the article in pdf format with graphics or for a faster download, in pdf format without graphics.)

       Consistency Pays Long-Term Dividends by Rich Todd and Terry Mancini, Innovest Portfolio Solutions. Does the "hot dot" necessarily lead to superior performance? We have all learned the virtues of diversification with the tech bubble having been deflated, yet investment magazines and rating services still are evaluating and promoting cumulative investment performance. The consequence is that a couple of huge years based on big bets could make cumulative performance look stellar but, as we learned in the tech bubble, big bets rarely work in the long run. So how are we to evaluate performance? How often a manager has outperformed their peer group, or the consistency of outperformance, is an extremely important criterion in securing superior long-term portfolio performance. In a study of 40-percentile managers (those who outperform 60% of their peers), which most rating services would consider marginal managers, it has been found that managers who consistently do just a little better than their peers are, in fact, the key to achieving stellar long-term performance. This is a must read. (Download the article in pdf format with graphics or for a faster download, in pdf format without graphics.)


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       Assessing the Damage by Ron Surz, PPCA, Inc., September-October 2002. The market lost another 17% of its value in the third quarter of 2002. In general, stock market investors have seen almost half their wealth evaporate in 2.75 years. While some segments of the market have been clobbered, others have actually thrived. Technology stocks have lost 77% of their value thus far this century, with large cap growth suffering the most, chalking up an 87% loss. By contrast, small value companies are up 79% with the small cap value healthcare enjoying a whopping 155% increase in value. Yes, it is possible to make money in this market ... and a lot of it. (Download the article in pdf format.)

       Is The Loss Of Investor Confidence Necessarily Bad? It All Depends On Whether You Are A Consultant Or A Broker by Stephen C. Winks. Consultants view a market correction as a necessary and anticipated event that keeps the capital markets healthy. When the market goes up, there is little reason for concern for individual investors because it feeds their sense of well-being, but when professionals see huge disparities between how companies are valued in the public trading markets and the private capital market, there is good reason for alarm. Could conventional wisdom be wrong? If we want to maximize our equity exposure in a bull market, then how does it logically follow that one should "stay the course" in a bear market? Ironically, investors who have taken a beating by maintaining full equity exposure in a deteriorating market generate the negative investor sentiment necessary to reprice the market and restore it to health. (Download article with graphics in pdf format or download article in pdf format without graphics - a faster download.)

       Assessing the Damage by Ron Surz, President, PPCA, Inc. The market lost another 17% of its value in the third quarter of 2002. In general, stock market investors have seen almost half their wealth evaporate in 2.75 years. While some segments of the market have been clobbered, others have actually thrived. Technology stocks have lost 77% of their value thus far this century, with large cap growth suffering the most, chalking up an 87% loss. By contrast, small value companies are up 79% with the small cap value healthcare enjoying a whopping 155% increase in value. Yes, it is possible to make money in this market ... and a lot of it. (Download the article in pdf format.)

       Is The Loss Of Investor Confidence Necessarily Bad? It All Depends On Whether You Are A Consultant Or A Broker by Stephen C. Winks. Consultants view a market correction as a necessary and anticipated event that keeps the capital markets healthy. When the market goes up, there is little reason for concern for individual investors because it feeds their sense of well-being, but when professionals see huge disparities between how companies are valued in the public trading markets and the private capital market, there is good reason for alarm. Could conventional wisdom be wrong? If we want to maximize our equity exposure in a bull market, then how does it logically follow that one should "stay the course" in a bear market? Ironically, investors who have taken a beating by maintaining full equity exposure in a deteriorating market generate the negative investor sentiment necessary to reprice the market and restore it to health. (Download article with graphics in pdf format or download article in pdf format without graphics - a faster download.)

       Some Thoughts on Multi-Discipline Accounts (MDAs) and Other Managed Money Programs by Ron Surz, President, PPCA, Inc. In light of recent discoveries about the importance of investment style, there is substantial room for improvements in MDAs as well as other multi-manager programs. There are three areas in which much improvement can be achieved: skill, diversification and tax awareness. (Download article in pdf format.)

       Surz/Senior Consultant Style Analysis: More of the Same by Ron Surz, President, PPCA, Inc., March-April 2002. (Download article in pdf format.)

       Investment Consulting Craft Trades Up to 21st Century Ron Surz, President, PPCA, Inc. Successful investment consulting encompasses two distinct crafts: the ability to develop quality advice and the skill to deliver that advice. This article focuses on the pressing need for the use of current technology to bring about evolution and modernization in the first of these crafts. Only if this occurs can clients truly benefit from what we have learned about investing over the past 20 years. (Download article in pdf format.)


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       Surz/Senior Consultant Style Analysis: More of the Same by Ron Surz, President, PPCA, Inc., March-April 2002. (Download article in pdf format.)

       Market Extremes by Ron Surz, President, PPCA, Inc. It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness ," so begins Charles Dickens' A Tale of Two Cities. Ever wonder what times were best and worst in the capital markets? The answer depends on your time horizon - month, year, 10 years, whatever. The following table identifies those "best and worst of times" for varying horizons. It's interesting to note that the worst times were at the beginning of our market history and that the best times have happened more recently, especially for longer horizons. Where do you suppose the age of wisdom and the age of foolishness fits in this picture? (Download article in pdf format.)

       Surz/Senior Consultant Style Analysis: Strong Finish to a Topsy-Turvy Year by Ron Surz, President, PPCA, Inc., November-December 2001. (Download article in pdf format.)

         Evaluate Skill, Not Style by Ron Surz, President, PPCA, Inc. The motto of professional investment performance evaluators has long been "evaluate skill, not luck." However, about five years ago, those of us in the evaluation business became aware of the significance of investment style in measuring skill. That is, we learned that skill could only be properly identified if we first lifted the thick clouds of style that routinely distort our perspective. The immediate past is a good case in point. (Download article in pdf format)

        Surz/Senior Consultant Style Analysis: A Tale of a Tangled Style Web by Ron Surz, President, PPCA, Inc., July 2000. (Download article in pdf format)

         Are Warren Buffet, George Soros, and Julian Robertson Trying to Tell Us Something? by Stephen C. Winks. Warren Buffet observed in his now famous annual shareholder meeting of Hathaway Berkshire that the public trading markets for U.S. securities have become overpriced relative to intrinsic value of their underlying businesses. George Soros, the dean of hedge fund managers, has decided the U.S. equity markets, particularly the internet and technology sectors, have become so detached from traditional valuation fundamentals that he is adopting a new, lower risk investment style, completely out of character for a person who is in the pantheon of truly great money managers. Julian Robertson, another legendary hedge fund manager, is liquidating his hedge funds as he withdraws from the market. (Download article in pdf format)

         Using a Blend to Evaluate Style: Avoiding One-Size-Fits-All Benchmarks by Ron Surz, President, PPCA, Inc.. There is an alternative to custom benchmarks that, while less precise, is easily constructed and, if done properly, is reasonably accurate. This alternative is returns-based style analysis.(Download article in pdf format)

         Volume Weighted Average Price: Evaluation or Evasion? by Wayne H. Wagner, Chairman, Plexus Group. Traders in London refer to volume weighted average price trading as "heading for the air-raid shelter." Rather than trading to maximize performance, traders head for the shelter of a more pliant benchmark. In the process, the investment objective can become secondary to merely looking good against VWAP. The key to effective implementation is to overcome conflicting objectives and align trading strategy with investment strategy.(Download article in pdf format)

         Surz/Senior Consultant Style Analysis: Go-Go Growth: Growth Stocks Continue Phenomenal Run by Ron Surz, President, PPCA, Inc., May 2000. (Download article in pdf format)

         Surz/Senior Consultant Style Analysis: Portfolio Opportunity Distributions for the First Quarter of 2000 by Ron Surz, President, PPCA, Inc., April 2000. (Download article in pdf format)


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   Asset Management
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         Have We Oversold Technology and Internet Companies, And Are Now at a Teachable Moment? by Stephen C. Winks. Commission brokerage is all about creating unrealistic investment expectations and reacting to what sells, which means investors are more likely to buy high and sell low than to buy low and sell high. (Download article in pdf format)

         Surz/Senior Consultant Style Analysis: Non-U.S. Style Analysis Report for Periods Ending December 1999 by Ron Surz, President, PPCA, Inc., March 2000. (Download article in pdf format)

         Liquidity Research Suggests the End of the Bull Market Is In Sight by Stephen C. Winks. Charles Biderman, president of Liquidity TrimTabs.com Investment Research, Inc., suggests that the bull market we have enjoyed all these years may be coming to an end. His research offers brilliant insight into how we might use liquidity analysis to gauge the market's direction. (Download article in pdf format)

         Performance Evaluation Lessons for the 21st Century by Ron Surz, President, PPCA, Inc. Every day, significant decisions are made on the basis of performance evaluation. Policies are re-examined, strategies are altered, managers are hired and fire, to name jew a few such decisions. Yet, despite its importance, investment performance evaluation remains in the Dark Ages, especially in light of the technological revolution .... (Download article in pdf format)

         Surz-Senior Consultant Style Analysis: Portfolio Opportunity Distributions for the Year 1999 by Ron Surz, President, PPCA, Inc., February 2000. (Download article in pdf format)

         A Perspective On the 1990's by Ron Surz, President, PPCA, Inc. As Jackie Gleason used to say, "how sweet it is!" But just how sweet was this last decade of the 20th century for investors? To answer this question, we need to ask "relatiave to what?" In this article, we contrast the decade of the 1990's with prior decades, going back to 1926, looking for the best and worst of times. (Download article in pdf format)

         Surz/Senior Consultant Style Analysis: Report for Periods Ending December 1999 by Ron Surz, President, PPCA, Inc., January 2000. (Download article in pdf format)

         Asset Management: Engineering Portfolos for Better Returns by Eugene F. Fama, Jr. As consultants, we are looking for a methodology that we can use to construct our clients' portfolios, which is better than the conventional methodology of guessing which managers or asset classes will have excess returns. The Fama-French Three Factor and Five Factormodels has bcome the most widely used portfolio construction tools in the industry. It is used by firms such as SEI, Smith Barney and Lockwood Financial Group, and provides a useful framework within which we can manage factors in a more reliable way than the old methodology of managing asset classes. We have asked Gene Fama to explain the Fama-French Three Factor model. (Download article in pdf format)

         Hidden Costs Drag Performance by Stephen C. Winks. According to a new study by the Plexus Group, a Lost Angeles-based consulting firm, it has been found that a variety of sometimes hefty, often hidden transactions cost may be dragging down otherwise good performance in the mutual fund industry. (Download article in pdf format)

         Active vs. Passive Management by Rex Sinquefield. Active versus passive management is essentially a debate about both market behavior and investor behavior. With respect to market behavior there are, at the extremes, two views. At one extreme is the well-known efficient market hypothesis which says that the prices are always fair and quickly reflective of information. In such a world neither professional investors nor the proverbial "little investors" will be able to systematically pick winners or losers. (Download article in pdf format)

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