Numerous industry studies throughout the years have concluded that long term investment performance can largely be explained by “Asset Allocation.” Knowing a client’s situation, objectives, and time horizon, is the foundation of the Advisor’s relationship with that investor client.
But what makes asset allocation work? How can you keep your client committed to that asset allocation “roadmap”? The answer to those questions brings us to our second “A” word, “Alpha.” Alpha, simply defined, is the excess return that measures a manager’s ability to outperform the market. A manager producing positive Alpha is also producing a positive experience for your client. A positive client experience is every advisor’s goal. A happy client is a lifelong client.
Stock selection, sector weighting and rotation, style weighting and rotation, market timing, and risk management are all techniques managers can employ to produce positive Alpha. In a world without fees, positive Alpha generation is relatively easy for a manager to attain. Unfortunately, that world does not exist.
Back here on earth, we can now introduce the concept of portfolio replication. By replicating or cloning all of the positive alpha generating aspects that superior managers produce and combining those characteristics with significantly reduced fees, we can amplify alpha generation with, wait for it...” Fee Arbitrage.” The last “A” word Arbitrage”, is the sweetest of the three.
When offered the opportunity to take advantage of pricing differences and access additional profit with little or no additional risk, what client would say no?
Portfolio replication is the catalyst behind that pricing opportunity. Advisors employing replication will receive “A’s” for their efforts. Join us now as we get ready to revolutionize industry!