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In a post-financial crisis world advisors are under pressure to generate impressive returns and to outperform other advisory firms. But Vanguard CIO Tim Buckley thinks there are four things the most successful advisors do. 1. They are behavioural coaches who help clients “get on the right path and prevent them from taking wrong turns.” 2. They are “tax-efficient through prudent asset location and tax-smart spending strategies.” 3. They keep investment costs low. 4. They rebalance in a disciplined fashion. “Vanguard believes that advisors who successfully apply these basic concepts can add about three percentage points to their clients’ annual returns versus advisors who don’t.”
Millennial or Generation Y investors, those in the 21-36 age group, are the most financially conservative investors since the Great Depression, according to a UBS Investor Watch survey. 34% of Millennials said their risk tolerance was conservative or somewhat conservative, with their average asset allocation of 52% cash, compared with 23% for other investors.
“They have a Depression-era mindset largely because they experienced market volatility and job security issues very early in their careers, or watched their parents experience them, and it has had a significant impact on their attitudes and behaviours,” Emily Pachuta, head of investor insights, UBS Wealth Management Americas told FA Mag.
PIMCO To Start 19 Actively Run ETFs (Bloomberg)
PIMCO, the world’s largest bond manager plans to launch 19 activity managed exchange traded funds (ETFs), according to Alexis Leondis at Bloomberg. These will be variations of mutual funds like PIMCO Income and PIMCO Municipal Bond. “We believe actively managed ETFs provide another way for investors to access Pimco’s global strategies across fixed income, equities and commodities, all backed by the firm’s time-tested investment process,” the firm told Bloomberg.
It’s Pretty Crazy How Different Pension Funds Look Around The World (Business Insider)
Pension funds which took a huge hit during the financial crisis did very well for themselves dying the 2013 stock market rally. Not experts expect many pension funds to lower their exposure to stocks and increase their exposure to bonds. “We expect nearly $US150bn of annual S&P pension asset allocation equity outflows in 2014 and 2015 as the average equity allocation of S&P 500 plans drops from 45% to roughly 30%,” Deutsche Bank’s David Bianco said. “We do not see this as a threat to healthy S&P 500 returns through 2015, but it should help slow the ascent in long-term interest rates and keep corporate credit spreads tight.”
Investors are increasingly anxious about higher interest rates in the U.S. which means a stronger dollar and is bad for emerging economies with large current account deficits. This has caused money to leave emerging markets and flood into U.S. Treasuries. “[Global Emerging Market] funds saw further outflows of approx. $US2.4 billion last week, after $US1.3 billion of outflows in the prior week,” UBS’s Geoff Dennis said in a note.
“This is now the 13th consecutive week of outflows from EM funds, the longest such streak since 2002. All fund types (by region), saw outflows last week. On a four-week moving average basis, there have been net outflows of $US1.1 bn from dedicated GEM funds; $US0.3 bn from LatAm; $US0.1bn from Asia ex Japan and $US0.05 bn from EMEA,” Dennis wrote. “In the first three weeks of 2014, GEM funds have seen total outflows of $US5.0 billion (MSCI GEMs is down today by 5% YTD), following outflows of $US15.9 billion for the whole of 2013.”
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