Fowler notes that improving economic data is causing an uptrend in earnings and this could cause a sustained upturn. However, the American consumer, along with the financial sector and government, still need to de-lever and this creates what he deems "unfinished business."
With short-term cash rates next to zero, selective risk taking is necessary to grow the real value of a portfolio, he says. In a recent note to its clients, Glenmede recommended buying higher-quality and high-yield bonds, while keeping bond maturities for most core fixed-income positions at short to intermediate levels. Fowler also recommends investing in high-quality growth stocks and overweighting international equities and fixed income.
Glenmede Investment Philosophy
How are Glenmede clients' assets deployed today?
A moderate to aggressive-risk investor with low liquidity needs would likely have about 23% in cash and fixed income and about 77% in equities and alternative investments.
The alternative part of the portfolio is about a third, with 15% of the portfolio in hedge funds, 12% in private equity, 5% in real estate and 4% commodities. Stocks make up about 40% of the portfolio, with about a two-to-one ratio of U.S. stocks to international stocks. The cash and fixed-income part of the portfolio is 23%, with less than half allocated to tax-exempt bonds.
Previously, the average Glenmede portfolio
underweighted equities. Now equities will have a neutral position in
the average portfolio. In the future, stocks might be overweight,
according to Fowler.
Glenmede has substantial endowment and
foundation business, and the firm usually invests a little more
aggressively in this segment.
"That's because endowments tend to have longer time horizons and are more prepared to invest in illiquid and complex securities," Fowler says.
Tax planning is also a key part of generating better returns for high-net-worth clients. So Glenmede officials say they are preparing for higher taxes. That means more low-turnover investments, fewer hedge funds (which are likely to have higher taxes) and more municipal bonds. These are all strategies that will help boost the client's bottom line, according to Fowler.
What Clients Want
Managing
investments is the firm's No. 1 goal. This usually means preserving
wealth across generations. But the private wealth practitioner also
needs to be as good in offering advice and services for other estate
planning and personal issues, Fowler says.
Clients often come to the firm primarily for investment advice, Fowler says. "But as the relationship deepens, they also tend to put more and more value in the administrative services that we provide," Fowler says.