Being part of a fund research team in a way is a little bit like being part of a cult. Every firm has its own world view. Its own culture. Its own vernacular. Its own anthropology. Benjamin Graham acolytes might worship at the font of intrinsic value. Macro economists might be looking at the butterfly effect-what a Chinese cell phone owner's behavior means for the United States. Accountants might be obsessed with the dilutive quality of stock options. Trend traders might feel at home on the range-on range-bound stocks, that is.
"You drill down enough, most of the time the people involved [on a research manager team] have a similar worldview, because otherwise the second person would have never been hired," says Chris Cordaro the CIO and CEO of RegentAtlantic in Morristown, N.J.
To bring these teams out into the light, Financial Advisor has gone on an annual hunt for the all-star research manager team, a cross-section of professionals, nominated by their peers, who help shape the makeup of client portfolios. The all-star team will be recognized at the 2nd Annual Fiduciary Gatekeeper Research Summit, sponsored by FA and Private Wealth magazines, October 11-12 at the Hyatt Regency Boston.
Everybody wants to buy stuff cheap and sell dear. Most managers would describe their styles as value oriented, or say they manage risk. Most would say they have due diligence bona fides or that they meet with managers three times a week. Most of them are trying to find out whether it's skill or luck driving a successful stock or fund. But at the end of the day, the view is subjective and intuitive. You've got to have good feelings about the way markets work-and the way people work, too.
Raymond James Financial
St. Petersburg, Fla.
Tarek Helal, Vice President,
Product Research and Development
Take Tarek Helal, co-head of the alternative investments group at Raymond James. "I view research as more art than science," he says. He took the position after winning a role as assistant to chairman Thomas James in 2009, a special program that allowed him to focus on analysis and learn a philosophy about investments, including a general level of conservatism about them.
He recalls that in the depths of the financial crisis, James was fond of a REIT with a high dividend, something like 18% that everybody else was dumping on. James' attitude: "So what?" Even if it was cut to 9%, it would still be a yield that was easy to cover.
Given that his focus is on alternatives, Helal is jousting in a rockier tiltyard, yet he says that most of that conservative outlook still applies and that simplicity rules the thought process in his alternatives team. "I would probably class myself as a value investor," he says. "At the end of the day, your investment return is a function of what you paid for the asset."
Given that alternative investments can be opaque, that they can freeze up clients' money or meanwhile grind it up in tax-inefficient trades, Helal says it's important to search for risk-adjusted return profiles that make up for these "structural shortcomings." He is currently fond of long-short equity funds. "A lot of that is a function of being constructive on the equity markets generally. If you look at the way long-short funds generate their returns, it's a dispersion-based strategy. So you buy good companies, sell short bad ones and eventually their return stream will disperse and you will theoretically gain on both sides." That view has been dampened a bit by the high correlations in the market, a likely result of the Fed-induced cash flood, but Helal is optimistic that the chorus will disperse, correlations will decline, consonance will become dissonance, and that good bets will, once again, be good bets.
Altfest Personal Wealth Management
New York, N.Y.
Lew Altfest, CEO and CIO
Andrew Altfest, Executive Vice President of Strategy and Investments
Ekta Patel, Managing Advisor
The team members at Lewis J. Altfest & Co. are always curious about companies that have been flagellated by the media. After all, negative headlines can sometimes cover up clean metrics, at least as far as this deep value, contrarian firm is concerned.
Take banks, which have gotten slugged by investors for not being the champions they were in the halcyon days of 2007. Altfest likes a sector out of favor. And the banking community, still roiling from JP Morgan's notorious multi-billion-dollar loss on trading derivatives in June, looks like the pretty girl in the John Hughes movie that nobody notices because of her glasses.
People don't want to own them "even though a lot of them are attractively priced and are as safe as they've been as far as you can remember," says Andrew Altfest, a member of the firm's portfolio action group along with his father, founder Lew Altfest, and a third member, Ekta Patel.