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Mid Cap: The Goldilocks Asset Class
Domestic mid cap stocks may be on their way to being dubbed "the Goldilocks asset class." Long-term risk and return analysis demonstrates that mid cap stocks historically fit into a "sweet spot" of higher return for lower risk. In this paper, we'll look at why U.S. mid cap stocks hit this sweet spot, examining factors such as business cycle and earnings growth, and suggest how investors can take advantage of the opportunities mid cap has to offer. Read and\or download white paper
Fee Equality: Leveling the Playing Field for Participants
For most plan sponsors, managing their plan with the participants' best interests in mind is not just a fiduciary duty; it is a driving principle. Sponsors know that recordkeeping and other costs associated with managing the plan can have a significant impact on retirement outcomes. This is why we are encouraging plan sponsors to examine the idea of fee equalization. Employers don't usually intend to charge fees unfairly, but may be surprised to know that fees are often inadvertently structured inequitably. Fee equalization can eliminate fee imbalances across the participant base and help plan sponsors embed fundamental fairness into the plan. In this paper, we'll examine the ways in which traditional fee structures create imbalances among participants and consider ways to equalize fees. Download white paper (PDF file, 646KB)
A Private Equity Primer: Why and How to Invest in PE
The return potential is the beacon that draws investors to private equity; the asset class has outperformed all other asset classes over long time periods. In addition to returns, there is a sense of fulfillment and satisfaction that some private equity investors experience, knowing that their investment dollars are contributing to economic development and growth. The allure of being in the groundswell of new ideas can be a powerful attraction for the asset class. Before you invest in this asset class, it is important to understand how private equity works. In this paper, we provide the basic information needed to make an educated decision on whether or not private equity is right for you. Download white paper (PDF file, 187K)
The Paternalization of Participant-Directed Plans
This paper is relevant to retirement plan sponsors. The retirement plan industry has been refining and improving the defined contribution system over the last few decades, and many workers now have access to a variety of high-quality investments and in-depth investment education to assist them in planning for retirement, thanks to their employer-sponsored retirement plans. But even with these advantages, many participants are falling far short of their retirement goals. Studies of participant investment behavior indicate that poor investment choices may be a significant factor in chronic retirement savings shortfalls. In this paper, we'll examine the research covering participant investment behavior and discuss why paternalistic investment solutions may help to improve participants' long-term outcomes. Download white paper (PDF file, 138K)
The I AM Learning Partnership: Building Business in Partnership with Community
A primary objective of Arnerich Massena's I AM Learning Partnership is to exemplify business in partnership with community. We feel that, as a model for other corporate citizenship programs, the I AM Learning Partnership offers a unique and remarkable strategy with far-reaching impacts. As we move forward into the twenty-first century, it may be necessary for corporate America to step up and fill in the massive gaps caused by a lack of government funding. Education is one area in which corporate programs can provide the greatest support. In this paper, we provide a blueprint for businesses wishing to develop similar community programs. Download white paper (PDF file, 1105K)
The Investment Policy of the Future
As we face accelerating changes in the world, affecting everything from technology to the environment, the need to evolve quickly and gracefully is heightened. To think that the world can change this fast but your investment strategy can stay the same is unrealistic. Investing, by its nature, should be forward-looking rather than past-focused. As we look to the future, those who have the flexibility to shift and adjust will have a distinct advantage. In this paper, we'll share some ideas on how to build an investment policy that will embed into your strategy the flexibility and adaptability that are essential in today's environment. Download white paper (PDF file, 490K)
Roth Retirement Savings: More Accessible Than Ever
This paper is relevant to retirement plan sponsors. The 2012 fiscal cliff legislation brought us, among other things, a new regulation making in-plan conversions to a Roth option more easily accessible; now, participants don't have to retire or separate from service to convert assets from a pre-tax account into a Roth. Employers are recognizing the significant benefits a Roth option offers to certain participants, and the new law provides an impetus for taking a deeper look at why you may want to consider adding a Roth option. In this paper, we discuss how a Roth option may be a valuable addition to a retirement plan, and considerations for plan sponsors when deciding whether or not to offer Roth contributions. Download white paper (PDF file, 675K)
To the Point: 2013 Tax Changes
New Tax Provisions Make 2013 More Taxing by Douglas R. Lovett, CPA, Geffen Mesher The American Taxpayer Relief Act of 2012 was signed into law in January. Tax rates did increase for upper-income earners, and the Act extended several key tax breaks that impact individual and business taxpayers. This article provides a brief summary of the most important provisions. Download a pdf (PDF file, 340K)
What is the Future of Funds of Hedge Funds?
Funds of hedge funds assets worldwide have decreased 42% from 2008 to 2012. The industry faces issues surrounding performance, fees, and liquidity. With these pressures, what does the future look like for funds of hedge funds? In this paper, we explore how the industry is changing and discuss how investors can evaluate and adapt their strategies. Download white paper (PDF file, 633K)
In Search of a Recordkeeper: Fiduciary Best Practices
On March 31, 2012, a U.S. District Court levied a $35.2 million judgment against ABB, Inc. for breach of fiduciary duty. The defendants included the company (ABB, Inc.), the committees serving the plan, and one executive who was named personally. With the appropriate precautions, this doesn't have to happen to your retirement plan or to you. In this paper, we describe the fiduciary best practices that can help prevent and protect against litigation for breach of fiduciary duty as it pertains to selecting and negotiating with recordkeepers. Download white paper (PDF file, 569K)
A Field Guide to Exchange-Traded Products
Since exchange-traded products leapt onto the scene in the early 1990s, their growing popularity has led to a proliferation of different types of exchange-traded products. There are now at least six different exchange-traded structures, each of which can behave differently in given market conditions. Investor interest in the various types of exchange-traded instruments continues to increase, but tracking the different structures and anatomies of each "species" can be as confusing as distinguishing between a Madagascar Partridge and a New Zealand Quail.
In our April 2012 white paper, Examining Exchange-Traded Funds, we discussed the proliferation of ETFs, describing how these relatively new investment products are constructed and traded. In this paper, we take a deeper look at the different species of exchange-traded products: how they're constructed, their risks, and how they might fit into a portfolio. Download white paper (PDF file, 584K)
Geffen Mesher & Company P.C.'s summary of Patient Protection and Affordable Care Act of 2010 tax changes. Click here to read.
Seeking the Investment Frontier
The Wild West, the Arctic poles, space: humans have always been fascinated by the frontiers of civilization, expanding our reach into the furthest, deepest places we can find. For investors, frontier markets not only inspire excitement and adventure, but also represent a wealth of virtually unexplored opportunities. As more investors have become aware of the advantages of "globalizing" their portfolios, emerging markets countries have become inundated with investor capital seeking to take advantage of their rapidly growing economies. But there exist on the fringes a number of countries that are either earlier in that cycle of development or on its precipice. In Seeking the Investment Frontier, we examine frontier markets, discussing why they are attractive to investors and what their risks are. Download white paper (PDF file, 516K)
Examining Exchange-Traded Funds
Exchange-traded funds (ETFs) have seen explosive growth since their introduction to the U.S. market in 1993. Although hugely popular, these investment products are not well understood by most investors. What are ETFs really, and how do they work? In this white paper, we review the history and construction of ETFs, and explore in depth the potential risks and advantages of exchange-traded funds.
Download white paper (PDF file, 637K)
Making the Most of Your Match
The employer match is making a comeback. But with varying match amounts, schedules, and formulas, how do employers maximize the value of the match? In Making the Most of Your Match, Arnerich Massena explores the effects of different types of employer matches. You'll learn how other employers structure matches, and what to consider when structuring yours.
Download white paper (PDF file, 603K)
Lifetime Retirement Income: Annuities and Beyond
Planning for retirement can be complicated, fraught with emotions, and overwhelming for participants. And for defined contribution plan sponsors, evaluating lifetime retirement income solutions may not be much easier! In Lifetime Retirement Income: Annuities and beyond, Arnerich Massena explores retirement income solutions, discussing the issues faced by participants and the fiduciary concerns of employers. In this white paper, you'll learn about annuities, guaranteed minimum withdrawal benefit options, managed accounts, annuity shopping services, and out-of-plan options, and what to consider when selecting among these choices.
Download white paper (PDF file, 646K)
The Profit in "Sustainable" Investing: Debunking the Myth
The opportunities in resource scarcity and demand growth
In 2009, Arnerich Massena published the award-winning Sustainability: Opportunities in a Green Market. Since then, we have recognized that the word "sustainable" carries so many connotations and misperceptions, many heavily weighted with politics, that it makes it difficult to see the opportunities beyond the veil of ideology. By redefining the word and understanding that the focus is on risk-adjusted return potential by defining aspects of the current market environment, specifically resource scarcity and demand growth, we open the door to educating investors about this valuable opportunity set. In this paper, we discuss resource-related macroeconomic trends and the opportunities they present, outlining some of the ways in which Arnerich Massena currently works to apply this theme to portfolios.
Download white paper (PDF file, 856K)
Target-Date Funds: Are They Hitting the Target?
Are target-date funds accomplishing their goal of providing long-term investment allocations that will provide growth, preservation of capital, and, finally, a secure nest egg for participants? In Target-Date Funds: Are They Hitting the Target? we review their progress, discuss the changes they have undergone, and ultimately ask the question, “Are they hitting the target?”
Download white paper (PDF file, 648K)
Also, see the July issue of PlanSponsor magazine to read a roundtable interview featuring Jake O'Shaughnessy, Arnerich Massena advisor.
Core Menu Construction: Optimizing Your Investment Options
In April 2010, Arnerich Massena discussed the concept of a tiered structure to the presentation of investment options in our white paper, Conservation of Choice. This structure, in which options are presented to participants in tiers beginning with the simplest decision (pre-mixed portfolios) and moving to more complex decisions, can help prevent paralysis of choice from overwhelming participants by presenting only a few choices at a time. We'd like to present another tool that can help plan sponsors meet these challenges without taking away the choices that are important to many participants: the simplified core menu as tier two of a tiered investment structure. In Core Menu Construction, we discuss how a simplified core menu might fit into a tiered investment option structure and why it may be advantageous.
Download white paper (PDF file, 627K)
Investment Committees: More than the sum of the parts
Investment committees steward trillions of dollars in assets, and their ability to function effectively as a team can have a tremendous impact on the performance of those assets. In this white paper, we discuss the potential pitfalls and biases of group behavior that can affect investment committees and explore how a committee can make the best use of its collective knowledge and diversity of experience.
Download white paper (PDF file, 679K)
Is your bond fund a wolf in sheep's clothing?
The new face of the bond fund is the topic of Arnerich Massena's newest white paper. The bond funds of today may be very different from what investors have known in the past and come to expect. No longer solely operating by using cash to purchase bonds, some funds are incorporating derivative instruments that have different rules and risks from traditional bonds. In this paper, we explore the types of risks bond funds may carry and whether they continue to offer stability to a portfolio.
Download white paper (PDF file, 207K)
Active Versus Passive Investment Management: Analysis Update
In 2007, Arnerich Massena analyzed the performance of an actively managed strategy relative to a passively managed strategy. This white paper provides updated research and analysis of this issue.
Download white paper (PDF file, 204K)
Conservation of Choice: Simplifying Investment Options to Better Serve Participants
Over the past decade, retirement plans have been the beneficiary of a variety of "improvements," including bells and whistles of all sorts. Participants have been inundated with a growing spectrum of investment choices, reams of materials meant to educate and inform their investment choices, and advice to further guide their investment strategy. So why is it that participant-directed accounts continue to underperform defined benefit accounts, regardless of the number and quality of investment options offered? In this paper, the second in a topical series discussing the applications of behavioral economics in defined contribution retirement plans, we explore why retirement plan participants tend to undersave, misunderstand their investment options, and make poor allocation decisions. Based on studies in behavioral finance, we offer some potential solutions for structuring plan options to encourage participants rather than frustrate and confuse them.
Download white paper (PDF file, 154K)
Behavioral economics helps explain the reality of participant behavior
The rational "homo economicus" of classic economic theory has turned out to be a mythical creature. In reality, people making financial decisions fall prey to a variety of illogical thinking patterns. Surprisingly, these irrationalities are rather consistent and follow their own rules of logic. The study of the systematic ways in which people make irrational financial decisions is behavioral economics. This white paper, in providing an introduction to the field of behavioral economics, may help retirement plan sponsors better understand participant behavior and the reasons why a different approach to plan structure and communication could be in order.
Download white paper (PDF file, 190K)
Arbitrage, Leverage, and Short Sells, Oh My!
Making Sense of Hedge Funds
As one of the least-understood investment types in the industry, hedge fund investing is plagued by myths and misconceptions. Arnerich Massena's white paper, Arbitrage, Leverage, and Short Sells, Oh My! Making Sense of Hedge Funds is designed to help investors understand the fundamentals of hedge fund strategies and investing. We hope this publication serves to define and clarify hedge funds, as well as identify some key considerations for those investing, or interested in investing, in this space.
Download white paper (PDF file, 274K)
Economic Stimulus and the Great Inflation Debate: Why we're paying attention to inflationary pressures
What do The Wizard of Oz, Cabaret, and The Grapes of Wrath have in common, and how is this related to our current economic environment? Find out when you read Arnerich Massena's most recent white paper, Economic Stimulus and the Great Inflation Debate: Why we're paying attention to inflationary pressures. Even though deflation is on everyone's mind at present, there are signs that inflation is around the corner. In this paper, we explain why we are preparing for this environment and what our strategies are for meeting this challenge.
Download white paper (PDF file, 125K)
Not All Target-Date Portfolios Are Created Equal
As plan sponsors work to find solutions that meet their participants' needs, target-date portfolios are becoming more and more popular investment options in defined contribution plans. But there is wide variation in how target-date strategies are constructed. We believe it is important for plan sponsors considering these options to understand the issues and differences. For this reason, we present the information in this white paper, Not All Target-Date Portfolios Are Created Equal, so that plan sponsors can make informed decisions when selecting target-date portfolios for their participants.
Download white paper (PDF file, 164K)
Sustainable Investing: Opportunities in a green market
The Arnerich Massena research team is pleased to announce the publication of Sustainable Investing: Opportunities in a green market. Our research has found significant investment opportunities in sustainability and climate change mitigation. This paper provides a discussion of the business risks that have developed, both from the direct effects of climate change and also from resulting changes in the social and political climate. With every risk, there also come opportunities, and we discuss how investors may be able to take advantage of these opportunities with a sustainable investing model. It is our hope that this white paper serves to provide a context for further discussion and exploration of sustainable investing.
Download white paper (PDF file, 201K)
Going Global; Why understanding currency diversification within a global portfolio is important for U.S.-based investors
We are pleased to announce the publication of Going Global; Why understanding currency diversification within a global portfolio is important for U.S.-based investors. We believe this topic has significant impact on investors in today's global environment. The subject of currency diversification is complex and requires some contextual background, which we've allowed for in a longer piece. However, we feel that the impact and importance of this topic justifies a bit of extra time and firmly believe that you will find it of value.
Download white paper (PDF file, 238K)
Active versus Passive
We believe strongly that providing client education is a key element in creating a successful consulting relationship. One of our continuing objectives as your consultant is to provide you with timely communication and educational information. We are pleased to publish another of our white papers: Active vs. Passive Management: Putting the debate into perspective. We find the topic of active and passive management to be particularly relevant in today's investment environment and are providing this white paper in the hope that you will find it both interesting and informative.
Download white paper (PDF file, 210K)