From there, we monitor the managers’ exposures, performance, volatility, etc. like a hawk. If a specific manager’s approach strays outside of its historical norms, our Investment Committee performs an attribution analysis to determine if the problem is outside expectations.

For example, if a manager’s approach falters—and the performance cannot be attributed to the market environment – the manager is put on heightened review and becomes subject to a reduction in allocation or removal.

Hortz: Any other thoughts or recommendations you would like to share with advisors
Moenning: Actually yes, thanks for asking. In working with advisors over many years, we’ve learned it is critical for advisors to understand what to expect with tactical, risk managed strategies. For example, we believe advisors need to recognize that tactical risk management strategies CAN be expected to reduce exposure to market risk during severely negative environments, strive to “lose the least amount possible” during bear market cycles, and get it “mostly right, most of the time” during really big, really important moves.

However, it is important to understand that tactical risk-management strategies CANNOT sell at the top and buy at the bottom of market cycles (this is a fool's errand), protect against ALL losses during negative markets and avoid EVERY bear market decline.

Armed with the proper expectations, we believe that a tactical, risk-managed fund (or two) should be an integral part of every investor’s portfolio looking for heightened risk and volatility management.

Institute for Innovation Development is an educational and business development catalyst for growth-oriented financial advisors and financial services firms determined to lead their businesses in an operating environment of accelerating business and cultural change. We position our members with the necessary ongoing innovation resources and best practices to drive and facilitate their next-generation growth, differentiation, and unique client/community engagement strategies. The institute was launched with the support and foresight of our founding sponsors—Ultimus Fund Solutions, NASDAQ, Pershing, Fidelity, Voya Financial and Charter Financial Publishing (publisher of Financial Advisor magazine).

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