UNLEASHING THE INVESTMENT TIGER FOR ‘ENHANCED RESULTS’
Unleashing the investment TIGER for ‚Äòenhanced results’Alternative Investor, David Kaufman, Financial Post – May 11, 2012 ‚Äì 1:48 PM ETA new generation of Canadian businThe logical place for any money manager to start with prospective clients is with a portfolioanalysis: a study of their existing investments with the aim of determining whether, as a whole, it is well designed to meet theirfinancial objectives financial objectives in the short, medium and long term. After all, the direction of a manager’s research isdetermined by what their clients need. And what they need is largely dictated by what they already have.Since we live in a relative world, one way to approach this analysis is to compare the portfolio against that which a similarlysituated, best-in-class investor would have for themselves.Data regarding optimal portfolio allocation are relatively easy to gather and apply for institutional investors, such as pensionfunds, endowments and foundations. Canada is home to two of the world’s most respected institutional investors, Canada PensionPlan and Ontario Teachers’ Pension Plan, and many other institutional investors follow their lead when it comes to developingplans for the long term.What these institutions have in common are infinite time horizons and perpetual inflows from contributors.In other words, they don’t have a lot in common with high-net-worth individuals, who often have finite time horizons and don’thave new cash coming in on a regular basis. Where, then, should these investors look to see how the best in class do it? EnterTIGER 21, or The Investment Group for Enhanced Results in the 21st Century.Established in 1999, TIGER 21 is a peer-to-peer learning network for a group of high-net-worth investors who collectivelymanage almost $20-billion in assets. Relying on their diverse backgrounds yet common goals, TIGER 21 members differentiatethemselves from other high-net-worth groups (such as YPO) by exchanging detailed information about each other’s investmentswith the hope of achieving a more optimal investing approach for the whole.At home, TIGER 21 Canada is led by managing director and founding member, Thane Stenner, one of Canada’s best-connectedand highly respected experts on high-net-worth investing. Stenner, a Fellow of the Canadian Securities Institute, and his multi-family office team manage the investments of some of Canada’s wealthiest families through Stenner Investment Partners, part ofRichardson GMP Ltd.Stenner recently shared with me how these investors deal with the challenges and opportunities of investing in these uncertaintimes. In addition to sharing a significant amount of anecdotal evidence, Stenner was kind enough to provide me with the exclusiveTIGER 21 Asset Allocation Report for Q1, 2012, part of the group’s Collective Intelligence program. Here are some of thehighlights:
1. TIGER 21 members have “long only” public equity exposure of 22% – far below the 60% long only default metric usedby most advisors;2. Most are actively reducing their fixed-income allocations, which currently stand at 15%. This is not surprising given lowyields and a promise of depreciation resulting from increasing interest rates.3. With such low allocations to stocks and bonds, members are seeking growth and yield in the private markets, primarilythrough higher allocations to real estate (24%) and private equity (14%).4. Finally, hedge fund allocations have gradually increased to about 9% of their portfolios. There’s an old saying that youshould “fish where the fish are.” This appears to be exactly what North America’s elite investors are doing, and somethingCanadian investors of all types should consider: Follow the yield, follow the growth, follow those who have an idea ofwhat they’re doing.This doesn’t mean you should simply be part of a herd, because that is exactly what creates and perpetuates a default-basedallocation approach such as 60/40 equity/fixed-income split. Rather, determine what you have, what you need, and – with a littleinformation about others who are achieving success – how to achieve your objectives.