We tend to pick fights in finance. Part of that goes back to the fact that the partners in our firm are fighters, and Attain was, in many ways, born of fire, but that’s a story for another day. The point is that we think that investors should know what they’re getting into, even if the story behind the products discussed is inconvenient to those pushing them. As a result, one of the common “requests” we get from those unhappy with our opinions is one for a track record of our portfolio recommendations. After all, if we know so much better, why don’t we prove it?
It’s a dumb request. Let us explain why.
Attain is an introducing broker in the managed futures space. We conduct due diligence on managers and help clients construct managed futures investment portfolios. On face, with this in mind, it might make sense to request a portfolio track record. Maybe.
So which one would you like? We manage the portfolios of hundreds of clients, and not a single one is the same. We have clients that come to us and basically want someone to facilitate the investment process, but already know where they want to allocate to. We have some that will follow our suggestions, but on occasion , will put their own judgment into play, even if we discourage the move. We have some that we speak with daily, some who primarily email, and some who only speak with us when we call to check in and keep them appraised of their portfolio performance. Some are fully funded, and others leveraged 5 to 1. Some are held in Dollars, and some in Yen and a variety of other currencies. It’s just not that simple.
Now, theoretically, we could construct a “theoretical” portfolio and adjust it as we see fit in real time, providing an artificial track record. Maybe we will in the future; we won’t rule it out. But at the end of the day, there are maybe one in a million investors out there who would 1) be capable of maintaining such a portfolio, and 2) comfortable with the construction and risks. The performance of that portfolio won’t necessarily reflect the performance of the portfolio we construct for you, because yours is going to be tailored to YOU. And we wouldn’t have it any other way.
Managed futures portfolio construction is a personalized means of investing. Everyone’s available risk capital, investing goals, and risk tolerance is different. There are literally an infinite number of combinations among these variables, so our job is not about creating the perfect portfolio, but creating the perfect portfolio guidance for the individual investor’s profile. We aren’t going to say, “Invest $XXX in these four managers.” We’re going to say, “With your profile, a total investment of $XXX with Y% going to this strategy, Q% going to this one, and Z% going to this one makes the most sense. Here are several managers in each strategy bucket that fit the bill. Let’s talk more about them, and decide what you want to do.”
Now, if an investor wants to talk about our performance in portfolio construction, we can talk about the performance of client portfolios similar to the ones we’re recommending to them where the client is similar in investing temperament. That’s not a problem. But at the end of the day, the requests for a standard portfolio track record are falling on deaf ears- that’s not the game we’re in. Many of the products we criticize assume the industry is “one size fits all,” when we believe it’s anything but. To ask for a portfolio track record that falls into the same trap misses the point entirely.
March 26, 2012
I find it hard to understand why institutions and advisers soft shoe around when investors ask for some kind of benchmark or performance measure against which the value of the company/adviser’s contribution can be evaluated. I grant the point of tailoring a portfolio for the individual, adjusting for risk tolerance, etc., but I do not see how I, the investor, am able to evaluate your services if you will not give me some standard, target, performance measure, or any concrete, objective measurement point. Tailored if you will to the mix that you propose.
There was a recent flurry of news articles about Calpers adjusting their investment targets. The big pension and endowment managers have targets against which their performance is evaluated. Why is it not the same with Attain Capital Management?
April 5, 2012
Hi Bruce,
Most of the people asking us for a track record (especially in the public sphere) are proponents of managed futures “products” that take on that “one size fits all” approach. We don’t believe that’s the best way to invest in the asset class, and we don’t encourage the behavior by presenting a track record that falls prey to the same mindset. If we’re asked for a track record by an individual client, we can show performance of a comparable client, so it’s not a matter of being unwilling to provide that benchmark- just that the unique nature of managed futures portfolio construction better lends itself to a one-on-one conversation of comparable metrics than a glossy track record that only applies to 1% of investors.