Evensky: Market will be muted

Apr 14, 2013 @ 12:01 am

By Tatiana Baez

Harold Evensky, president of Evensky & Katz Wealth Management, remains hopeful about solid short-term market performance but doesn't expect too much.

The recent market run will end, and returns will be muted, he believes.

Mr. Evensky also recognizes the threat of potential black-swan events that could cause significant damage.

“Everyone now seems to think they have a good crystal ball, but people weren't necessarily ready for Cyprus,” he said. “North Korea is another one that could blow up at any time and cause short-term damage.”

In his model portfolio, Mr. Evensky uses what he refers to as constrained market optimization to make forward-looking estimates and incorporate risk.

“The optimizer gets bizarre conclusions ... Sometimes what we'll run with isn't theoretically the best, but it makes the most amount of sense,” he said.

The resulting model portfolio plays it safe with 26% core fixed income and 46% core equities but takes a riskier approach with 12% equity satellites and 10% open-mandate fixed income.

The short-term exposures from equity satellites are meant to complement the core equities, but can spike returns.

“More often than not, taking larger risks has proved to be pretty successful if done smartly,” Mr. Evensky said. “It just can't be guesswork, and the risks can't outweigh what you know will be successful.”

Mr. Evensky's clients also hold a 6% allocation in alternatives meant to diversify the portfolio through the AQR Managed Futures Strategy Fund (AQMIX) and the ASG Global Alternatives Fund (GAFYX).

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Female leaders highlighted as future of financial advice

InvestmentNews recognized 20 Women to Watch for their efforts to advance the financial advice industry.

Latest news & opinion

Finra panel dismisses $100 million case involving drop in Merrill Lynch stock

Former brokers bringing charges related to stock losses during financial crisis have had 15 cases proceed, four stopped so far.

Principal-Wells Fargo retirement deal would be among largest ever

Acquisition would be in line with trend of record keepers seeking to gain scale to combat fee reduction.

Finra panel dismisses $100 million case involving drop in Merrill Lynch stock

Former brokers bringing charges related to stock losses during financial crisis have had 15 cases proceed, 4 stopped so far.

ESG options scarce in 401(k) plans

There's growing interest among plan participants, but reluctance to add funds that take into account environmental, social and governance factors persists.

Ameriprise getting ready to launch its bank

Firm's advisers will soon have access to lending products such as mortgages.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print