Why are you Disappointed with your Alternative Investments?

Our newsletter for the week is live, and this time we’re looking at an interesting piece by Welton Investment Corporation, one of the bellwethers of the managed futures industry and a group Attain has a lot of respect for, especially when it comes to their excellent research work. As we said last time we highlighted their diversification research piece, “They say to get smarter… it helps to hang out with smart people. Well, in the investing world, the corollary may be: to be a better investor (smarter), read good investors’ (smart people’s) research work.”

In that light, we look forward to Welton’s periodic research pieces, and sunk our teeth right into their latest piece, titled “Pension Shortfall: Solving for the Missing 2%.” While the tone of the piece is a little more institutional (as in investors, not the negative connotation) as it gets into pension liabilities and whatnot – there was a gem of a chart in it which spoke volumes to us.

Welton’s article looks at whether pension funds will be able to meet the return target of 7.75% given various levels of investment in equities, fixed income, cash, and alternatives. Using the Grinold and Kroner method of modeling equity returns gave them an estimate of 7.39% return from equities, and a survey of corporate bond and treasury yields across various risk profiles and maturities provided an estimate of 3.25% return from fixed income investments. Assuming a 0.1% return from cash and a 61/36/3% split between equities, fixed income, and cash, they argue that pension funds not only need alternatives (and indeed, many have already begun incorporating alternative investments), but likely need a lot more alternatives. Naturally, this raised another question: how much will pension funds need to allocate to alternatives in order to achieve their target rate of return? Alternatively, given a certain allocation level in alternatives, what return would alternative investments need to generate to allow pension funds to reach their target return?

Answering this question produced a chart that, in our opinion, holds a master’s degree worth of information on just a single display, and inspired us to take the inquiry even further…

Source: Welton Investment Corporation Visual Insight Series: “Pension Shortfall: Solving for the Missing 2%

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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