Low-Volatility Investing for Retirement

Transcription

1 Low-Volatility Investing for Retirement MODERATOR Robert Laura President SYNERGOS Financial Group PANELISTS Frank Barbera Executive VP & Co-Portfolio Manager Company Paul Frank Lead Portfolio Manager Stadion Tactical Growth Fund David Haviland Portfolio Manager BCM Strategies

2 Investors Are Not Risk Averse, They re Loss Averse Vola&lity is an incomplete measure of risk to an investor. Behavioral finance tell us investors weigh losses more than gains Loss/Gain -10% 11% -20% 25% -30% 43% -40% 67% -50% 100% -60% 150% The mathematical reality of returns supports investors view of risk % Loss % Gain needed to get back to even 2 For Advisor or Investment Professional Use Only

3 Q: What is the #1 impediment to a successful long term investment strategy? A: Large losses in a portfolio. Q: What is #2? A: Staying in cash. 3

4 So what is the solu&on? Ac&ve management! Three main categories Strategic: Fixed and constrained Tactical: Ac&ve, flexible, defensive Dynamic: Best of both worlds but when it comes to a QDIA, Dynamic all the way. 4 For Advisor or Investment Professional Use Only

5 What about self- direc&ng par&cipants? Cri&cal to include tac&cal choices in the plan Tac&cal may include: Momentum based Tac&cal with strategic buckets Completely unconstrained Growth, downside protec&on and managed vola&lity 5 For Advisor or Investment Professional Use Only

6 Building a Modern 401(k) Plan Diversified Include all-in-one, do it for you solutions as well as individual tactical or dynamic options. Defensive Disciplined Efficient Participation is key when saving for retirement; but defensive capabilities can avoid sequential risk. A rules-based, repeatable process typically provides more consistent returns over time, smoothing the ride for investors. Include investment vehicles that are low cost, easily traded, transparent, and long-only. Verified Seek out managers with GIPS verified performance. 6 For Advisor or Investment Professional Use Only

7 Disclosures Copyright 2015 Beaumont Financial Partners, LLC. All rights reserved. Diversifica&on does not ensure a profit or guarantee against a loss. As with all investments, there are associated inherent risks. Stock markets, especially foreign markets, are vola&le and can decline significantly in response to adverse issuer, poli&cal, regulatory, market, or economic developments. Sector investments concentrate in a par&cular industry and the investments performance could depend heavily on the performance of that industry and be more vola&le than the performance of less concentrated investment op&ons and the market as a whole. Beaumont Financial Partners, LLC- DBA Beaumont Capital Management, st Avenue, Needham, MA (888) For Advisor or Investment Professional Use Only

9 The Roller Coaster Ride in U.S. Equities Buy-and-hold has not worked in recent years The S&P 500 Index is an unmanaged composite of 500 large capitaliza&on companies. This index is widely used by professional investors as a performance benchmark for large- cap stocks. You cannot invest directly in an index and 1,800 unmanaged index returns do not reflect any fees, expenses or sales charges. 1,700 S&P 500 (Actual High and Low Data) 1,600 Not including dividends Updated thru 1,500 December 2013 S&P 500 1,400-50% -58% Facing backlash from your conservative clients? ,300 1,200 1,100 1, For investment professional use only. Not for use with the public.

10 About Sierra Mutual Funds Founded in Santa Monica, California in 1987, Sierra and its affiliates presently manage or advise over $1.8 billion in assets for conservative clients. We focus on the goals of retirees and other conservative investors, and implement well proven risk-limiting disciplines to target specific goalbased outcomes. Our funds are managed with two overarching absolute return goals: To limit downside risk drawdowns of the overall portfolio To provide satisfying returns over a market cycle

11 How Does Sierra Attempt to Limit Downside? Unusually Broad Diversification Among Asset Classes We employ broad diversification across a wider variety of asset classes than most managers, seeking to create portfolios with lower overall risk and the potential for better returns Objective, Analytic Fund Selection Our managers leverage decades of research, analytics and insight to select funds, using a wide array of quantitative metrics with the goals of improving performance and mitigating risk Strategic Sell Discipline Unlike buy-and-hold strategies, we monitor each holding daily, and sell when any holding declines below a specific trailing stop, in order to eliminate any possibility that a further decline in that holding will impact the overall portfolio For investment professional use only. Not for use with the public. There is no guarantee that any investment strategy will achieve its objec&ves, generate profits or avoid losses. Diversifica&on does not ensure profit or prevent losses. Invest

12 Broad Diversification During the course of a market cycle, each of the Sierra funds moves tactically among a wide variety of asset classes:» U.S. & Global Equities*» Commodity Funds*» REITs» REIT Preferreds» Preferred Equities» Master Limited Partnerships» Emerging Market Debt» Global Bonds; Hedged Currency» Global Bonds; Unhedged Dollar» Convertible Bonds» Risk Arbitrage Funds Diversifica3on does not ensure profit or prevent losses. Each of these asset classes has its own set of investment» Treasury and Agency Bonds» High Yield Corporate Bonds» High Grade Corporate Bonds» Municipal Bonds» Floating Rate Funds» TIPs Inflation Protected Sec.» Low Duration Bonds» Inverse Rising Rate Funds» Internally-Diversified Funds» Tactically-Managed Funds» Misc. Low-Volatility Funds * Not usually included in the Sierra Strategic Income Fund For investment professional use only. Not for use with the public. Invest

13 Well-Proven Sell Discipline Sierra Applies a Trailing Stop to Each Holding, to Help Mitigate Downside Risk of The Overall Portfolio $ Sel l Buy Northeast Investors Trust (red) Moving Average (blue) Sierra s stops are proportionate to the historical volatility of each asset class, and are applied separately to each fund within that asset class For Illustra&ve purposes only. There is no guarantee that any investment strategy will achieve its objec&ves, generate profits or avoid losses. For investment professional use only. Not for use with the public.

14 Well-Proven Sell Discipline Sierra Applies a Trailing Stop to Each Holding, to Help Mitigate Downside Risk of The Overall Portfolio $140- $130- $120- Sierra implements a proprietary sell discipline for each asset class to help limit downside exposure Sierra s Tactical Approach $110- Buy-and-hold Approach -110 $ $ Hypothetical example 8 representing a High Yield Corporate 9 Bond Fund ( ) For Illustra&ve purposes only. There is no guarantee that any investment strategy will achieve its objec&ves, generate profits or avoid losses. For investment professional use only. Not for use with the public. Invest

15 Fund Managers David C. Wright holds degrees in civil engineering and law. After 13 years with major Los Angeles law firms, Mr. Wright served several years as Director of Technical Research for Bateman Eichler, Hill Richards, Inc., the largest investment banking firm west of Chicago, before co-founding Sierra in Kenneth L. Sleeper earned his MBA in Finance and his PhD from the University of Southern California. Since 1987, Dr. Sleeper has managed investment capital with Mr. Wright as co-founders and principals of Sierra. Frank Barbera Jr., CMT, is co-manager of the Sierra funds and separate accounts, and has managed equity and fixed income capital professionally since A global macro strategist employing both technical and fundamental analysis, Mr. Barbera managed parts or all of the Caruso USA LLC hedge fund for most of the last decade. For investment professional use only. Not for use with the public. Invest

16 Sierra Core Retirement Fund From inception, Dec. 24, 2007 $160- $140- $120- $100- $80- Sierra Core Fund (SIRRX) Benchmark* to 12/31/ We played defense very well for 14 months, then took good advantage of global uptrends For investment professional use only. Not for use with the public.

17 Sierra Strategic Income Fund From inception, December 27, 2011 $115- to 12/31/14 Sierra Strategic Income Fund (SSIRX) -115 $ $105- $ Barclays U.S. Aggregate Bond Sierra allocates and moves tactically among 15 types of bonds plus other income-oriented asset classes For investment professional use only. Not for use with the public. Invest wisely.

18 Our Goal is to smooth your financial road while helping you achieve financial objectives THANK YOU!

20 Bear Markets & Their Recovery Bear Market Dates Dura&on in Months % Decline Months to Break Even Total Dura&on in Months of Drawdown and Recovery Returns to Break Even 9/16/29 6/1/ % % 9/7/32-2/27/ % % 7/18/33-3/14/ % % 3/10/37-3/31/ % % 11/9/38-4/28/ % % 5/29/46-6/13/ % % 8/2/56-10/22/ % % 12/12/61-6/26/ % % 2/9/66-10/7/ % % 11/29/68-5/26/ % % 1/11/73-10/3/ % % 11/28/80-8/12/ % % 8/25/87-12/4/ % % 7/16/90-10/11/ % % 3/24/00-10/9/ % % 10/9/07-3/9/ % % 17 months Average Dura&on of Bear Markets - 36% Average Drawdown 27 Months to Break Even 44 Total Dura&on in Months of Drawdown and Recovery Average 18-40% % Excluding % % Past performance is no guarantee of future results. Stadion s actively managed portfolios may underperform during bull markets. Source: S&P 500 prices obtained from Bloomberg. Data for S&P 500 from Bloomberg prior to February1957 represents the S&P 90 Index. Dates of table: 9/3/29 3/9/09. An investment in the Funds involves risk, including loss of principal. The Stadion Funds are distributed by ALPS Distributors, Inc. An investor should consider the investment objec3ves, risks, and charges and expenses of the Stadion Funds carefully before inves3ng. The prospectus contains this and other informa3on about the Funds. A copy of the prospectus is available by calling Stadion Funds directly at (866) or Stadion Money Management, LLC, the investment advisor, at (800) The prospectus should be read carefully before inves3ng. For Ins&tu&onal Use Only

21 Tactical Strategies Respond to Systematic Risk Year by Year Performance of Asset Classes Past performance is no guarantee of future results. For Ins&tu&onal Use Only

22 Sharpe Ratio Measures Current Market Risk Market condi&ons and risk change regularly. The Sharpe Ra&o provides a current view of the risk and return poten&al of the market. Past performance is no guarantee of future results. For Ins&tu&onal Use Only

23 Effects of Volatility Over Time 6% Average Annual Growth Comparison $6,000,000 $5,000,000 6% Average Annual Growth with 10% Standard Devia&on $4,000,000 $3,000,000 6% Average Annual Growth with 20% Standard Devia&on $2,000,000 $1,000,000 $ Years Performance data quoted represent past performance. Past performance is no guarantee of future results. Graph is hypothe&cal and for illustra&ve purposes only. Source: Stadion. For Ins&tu&onal Use Only

24 Historical Returns: 10-Year Treasury Yields 4/30/54 12/31/ year treasury April 1954 December /30/54 8/31/81 Return ater 5% infla&on Equi&es: 4.10% Fixed: % 60/40: 1.70% Sharpe of 60/40: /30/81 12/31/14 Returns ater 3% infla&on Equi&es: 8.60% Fixed: 5.80% 60/40: 7.80% Sharpe of 60/40: 0.79 Stadion is the source for all of the graphs in this presenta&on. Infla&on- adjusted returns reflect the average consumer price index (CPI) of 5.00% ( ) and 3.00% ( ), and reinvestment of capital gains and dividends, if any. Equi&es are represented by the S&P 500 Index and fixed- income is represented by the 10- year bond. 60/40 represents 60% S&P 500 Index and 40% 10- year bond and has been adjusted for infla&on. The S&P 500 Index is the Standard & Poor s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices. One cannot invest directly in an index. All Benchmarks composite data supplied by third party vendors, assumes reinvestment of all dividends. The Sharpe ra&o measures the excess return per unit of devia&on, or risk. There is no guarantee that the investment strategies will succeed, the strategies are not an indicator of future performance and investment results may vary. Performance data quoted represent past performance. Past performance is no guarantee of future results and investment returns and principal value of the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted. Call or visit for current month end performance. STN /15/15 For Ins&tu&onal Use Only