Philosophy Implementation Investment Selection Low Cost Active/Passive Portfolios
The All Cap Global Diversified (ACGD) Separately Managed Account (SMA) Program
Business Retirement Accounts (401K's, Defined Benefit Plans) Portfolio Consulting
Our portfolios combine active and passive investment approaches in an effort to beat market returns while lowering volatility and keeping expenses low.
We focus on the net return our client’s will receive; that is, after fees and taxes.
We exploit the beneficial tax treatment of different asset classes by allocating portfolios at a household level, rather than an individual account level. We also practice tax loss harvesting in after-tax accounts to further reduce tax impact.
In seeking to reduce risk, we favor funds with reduced volatility and downside exposure (aka ‘downside capture’). Our portfolios are constructed to maximize liquidity with nearly all positions being tradable on an intraday basis.
Active and Passive
In efficient markets we choose low-turnover, low-cost, factor-tilted passive funds and in inefficient markets, where detailed knowledge and manager skill can bring added value, we may employ active management.
Strategic Allocation with Tactical Flexibility
Research shows1 that asset allocation determines most of the return dispersion in a diversified portfolio. Minor tactical portfolio shifts are considered for a portion of the allocation when market valuations create compelling opportunities.
Seeks to passively gain exposure to underlying return drivers such as value, size, dividend, quality and low-volatility.
Modern portfolio theory (MPT) has borne out the value of asset allocation and diversification. We include alternative asset classes to further enhance diversification in an effort to smooth and enhance returns.
Arete Wealth Strategists, LLC. follows a rigorously defined fiduciary investment process that takes into consideration the following attributes:
Strategic Portfolio Construction
• Long horizons merit some risk taking, while short horizons demand capital preservation
• Riskier portfolios may experience greater volatility but likely higher long-term returns
Three sub-factors we consider:
• Risk required to obtain objective(s)
• Subjective risk tolerance
• Capacity for risk – how much risk can you afford to take?
Asset & Sub-Asset Classes
• Do you strongly prefer to avoid or include certain assets classes?
• Are the favorable characteristics of an asset class more concentrated in a certain sub-asset class?
• We allocate among asset classes to produce differing risk/return characteristics
• Does the portfolio need to produce income? If so, for how long?
• Manager tenure, relative track record
and manager ownership