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Time for a Portfolio Tune-Up?

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The stock market continues to zigzag. The S&P 500, for instance, fell nearly 7% in May — making it the second-worst May since the ‘60s.

Given the many issues hanging over the market, ThinkAdvisor has gathered some winners of the Envestnet Asset Manager of the Year Awards to give their insights on how to best serve clients in the second half of 2019. These portfolio managers consistently deliver alpha while minimizing beta for advisors and their investor clients in changing market climates.

Frontier Asset Management, winner of the Strategist and Overall Asset Manager of the Year awards, aims to avoid “getting captured on the return side, which then lets the portfolio go anywhere … and can get clients into trouble by taking too much risk unknowingly,” according to Robert Miller, CFA.

Frontier Globally Diversified Strategies has outpaced its respective blended benchmarks 85% of the time, on average, over rolling three-year time periods. The portfolio team manages its strategies with a downside target — such as the balanced portfolio, which has a downside target of 10%.

The firm’s downside-first focus “is what’s really appealing to advisors,” Miller explains. “The biggest picture with advisors is helping their clients. If they’re in the right strategy and they stay in that strategy, they’ll be successful getting to their goals. It’s when they have to move strategies or they weren’t expecting the volatility … that clients get themselves into trouble.”

For those looking for new approaches, Roy Behren of Westchester Capital Management — which won the first Asset Manager Award in the Liquid Alternatives category — will discuss his team’s approach, which focuses on merger and acquisition arbitrage.

As Envestnet noted in its analysis of the portfolio, the strategy won “due to its ability to generate strong and positive uncorrelated returns in a period where equity markets were falling and most liquid alternative indices ended in the red. Merger arbitrage was the best performing liquid alternatives strategy, and [Westchester] led its peers.”

“It’s a non-typical strategy for a mutual fund, because it’s a hedge strategy,” said Behren. The market neutral strategy — which ended 2018 up 8% — is “intended to provide absolute returns in all market environments, and that was borne out” last year, he explains. Behren sees 2019 “merger activity continuing at a rapid pace.”

“Since inception [and over] the last 30 years, we’ve averaged about a 6-7% return a year, which doesn’t sound great when you’ve had the equity and bond markets rally over the last eight to 10 years. But the value [of it] is … when you have market dislocations, like the one last year,” according to Westchester Portfolio Manager Michael Shannon.

The June 20 discussion — which will be led by Tim Clift, chief investment strategist of Envestnet | PMC, Envestnet’s Portfolio Management Consultants group — will highlight disciplined, systematic and team-based ways to produce stellar results and understand the opportunities and dangers on the horizon for the market.

Sign up now for this informative event.


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