White Papers
We believe that Fortigent distinguishes itself among other wealth management solution providers through our highly experienced, respected experts and the experience we've acquired developing wealth management solutions for ultra affluent investors and their advisors. Our commitment to providing the highest level of client service and support ensures that advisors receive full benefit from our breadth of expertise. We provide our clients with ongoing advice, indepth analysis, research and commentary of topical and relevant issues. Fortigent's Advisor Portal gives advisors direct access to white papers and written reports, guaranteeing that information is always timely and relevant. To receive a complimentary copy of any of Fortigent's white papers please contact Sharon McEvoy at Sharon.McEvoy@Fortigent.com.
No Longer A Pipe Dream, Unified Managed Accounts Deliver Sought After Efficiency
January 25, 2010
Unified Managed Accounts (UMAs) in recent years have gained traction among the Registered Investment Advisor community. This popularity is seemingly due in large part to the active tax management, or the “tax alpha” that the investor can experience in a UMA. Although the investor’s after tax results are a desired real benefit, it could be argued that it’s the Advisor’s increased operational efficiency which is the greater value of the UMA structure to the RIA industry. That increased efficiency allows Advisors to dedicate more time to value driven activities and managing client relationships.
This white paper provides detailed information to an Advisor considering UMAs as a solution to back office operational headaches. The paper outlines an Advisor’s typical operational experience, comparing and contrasting differing ways Advisors, as business professionals, can choose to run their practice. As UMAs are a choice an Advisor does make, it will be shown that UMAs may be a superior investment delivery vehicle to effectively manage accounts.
When Bad Things Happen to Good Portfolios: Rethinking Risk & Diversification
November 03, 2009
“First, we make a guess. Then we compute the consequences of the guess. Then we compare the consequences to experiment. If it disagrees with [the] experiment, it’s wrong.
In that simple statement is the key to science. It doesn’t make any difference how beautiful your guess is. It doesn’t make a difference how smart you are, who made the guess, or what his name is. If [the guess] disagrees with experiment, it’s wrong.”
When physicist Richard Feynman offered this observation on theory versus empirical reality, it is unlikely he was thinking about Modern Portfolio Theory. The market events of 2008 and early 2009, however, certainly raised questions of whether or not Modern Portfolio Theory (MPT) actually holds up in practice.
This article examines some of the underlying tenets of MPT that do not hold up well in reality – where experiment clearly disagrees with guess – and summarizes several of the new ways investors and advisors are thinking about risk, diversification, and intelligent portfolio construction. In many ways, it is a “back to the future” storyline, as wealth managers realize the danger of blind faith in the “science” of investing and rediscover the importance of common sense.
When Wealth Management Met 2008: Now What?
October 22, 2009
The impact of the financial collapse of 2008 and early 2009 continues to reverberate through the wealth management industry. Hundreds of thousands of jobs were lost, many of them permanently, and the professionals that remain seem to spend as much time defending their firms or their industry as they do actually managing client wealth.
This article discusses appropriate “best practices” for wealth management firms, post-2008. It segments the discussion by addressing three specific questions: What has not changed, what has changed, and what has really changed. Advisors who successfully deliver differentiated and tax-effective investment portfolios, move beyond sharing data and information and, instead, provide their clients with wisdom and knowledge, and who can rebuild client trust in a post-Madoff world will be the ones best situated to capture the massive client and asset migration expected to take place over the next several years.
Advantages of Investing in Global Equity Managers
September 23, 2009
As progressive investors gravitate away from style-box investing and embrace both unconstrained managers and core- satellite portfolios, the employment of global equity is a natural evolution. Just like all-cap managers run portfolios unconstrained by market capitalization, global managers run portfolios unconstrained by country, seeking opportunities across the globe. They are free from the constraints of either investing only – or only not in – the US.
This paper explores the potential advantages and challenges of using global equity managers, as well as how best to implement these strategies within a well-diversified investment portfolio.
A Modest Proposal for Wealth Managers: First Do No Harm
April 08, 2009
In A Modest Proposal, written in 1729, the noted Anglo-Irish satirist Jonathan Swift suggested that the impoverished Irish could ease their economic troubles by selling their children as food. He went so far as to suggest that, “A young healthy child well nursed is, at a year old, a most delicious nourishing and wholesome food, whether stewed, roasted, baked, or boiled; and I make no doubt that it will equally serve in a fricassee, or a ragout.” (source: Wikipedia)
In today’s chaotic market environment, many wealth advisors find themselves impoverished as well – impoverished with respect to their clients’ trust.
This proposal calls for wealth advisors to go on a "trust offensive" and adopt as a standard part of their practices a wealth management version of the medical profession's Hippocratic Oath.
Currency Risk in International Investing
March 20, 2009
In February 2008, we wrote in the Fortigent Research Report about the increased risk of declining currencies to US investors in international equities. At the time, investors wanted higher international allocations to benefit more from global growth and/or because of the fear of a dollar crash (due to spiraling twin deficits in the US). Rising currencies against the US dollar had already generated a six year, 6.7% annual tailwind for the MSCI EAFE Index (2002-2007), resulting in 14.8% dollar based returns. Currency movements are extremely difficult to predict, as they are caused by many factors - GDP growth, central bank policies on interest rates and reserves, inflation expectations, market liquidity and sentiment. As the global financial crisis progressed in 2008, the dollar (and the yen to a lesser extent) became a “safe haven” reserve currency, despite even worsening US deficits.
This article is the second in a series of papers discussing the impact of volatile currency movements on realized investment return.
The Hitchhiker's Guide to Core/Satellite Investing
July 31, 2008
This article will present the arguments for a core/satellite investment approach in a practical, non-technical manner -- the way it might be explained to a potential investor or new client. While the use of some terminology is somewhat unavoidable, the intent here is to distill -- that is, hitchhike on--the quantitative and academic work that has been done on this subject and present it in an intuitive and easy-to-understand way.
The focus will be on (1) why it makes sense to include a healthy allocation to passive and/or tax-enhanced index strategies, (ii) why a diversified portfolio should include alternative investments, and (iii) how to build an intelligent core/satellite portfolio.
Unified Managed Accounts: The Next Step in the Evolution of High Net Worth Portfolio Management
June 30, 2008
The Unified Managed Account (UMA) is quickly becoming the new preferred framework for managing assets for high net worth individuals, yet the concept remains a mystery to many investors and advisors alike. This article will explore the many nuances of UMAs and discuss the advantages and disadvantages of this evolving investment vehicle.
Differentiating International Managers - Beta Drivers of Investment Strategies (Part I of 2)
March 20, 2008
On the surface, manager categorizations may seem neat and tidy, especially for US equity managers with style boxes ranging from large value to small growth. While these categorizations are a useful starting point to categorize and compare managers, it is important to look beyond the style box conventions that are so commonly used, especially when analyzing international equity managers.
In this two-part series (part two will be coming soon), we explore a range of alpha and beta drivers that are critical for selecting and benchmarking international equity managers. This information is an important component for implementing portfolio decisions.
Incorporating Alternative Investments Into High Net Worth Portfolios
February 26, 2008
Alternative investments play an increasingly important role within high net worth portfolios, but many advisors still struggle with incorporating them appropriately within a broader asset allocation context.
The purpose of this article is to support the argument that alternative investments belong in high net worth portfolios, analyze what the appropriate allocation is for them, and summarize some of the challenges associated with actually implementing more alternatives within portfolios of different sizes.
Investing in International Managers: Opportunities and Challenges
September 11, 2007
Coming to Portfolios Near You: Investment Ideas You Should Be Paying More Attention To
July 10, 2007
High net worth clients expect good investment performance. But many economists anticipate lower realized returns in the coming years, and clients and advisors alike are asking for new ideas.
This issue of Inflection Point surveys several of the more interesting investment ideas currently working their way into portfolios. Some of them remain largely academic or institutional. All of them, however, are trying to capture that elusive prey – alpha – and we believe they will all be in wide-spread use in high net worth portfolios within three to five years. Advisors, and investors, should be paying close attention.