The content contained herein is purely for informational purposes and is neither an offer to sell nor a solicitation of an offer to purchase any securities. Such an offer will only be made to pre-qualified investors by means of a confidential private placement memorandum and related subscription documents.

Third Quarter 2013: Chart of the Quarter

The reward for assuming volatility risk has varied dramatically in the past several years. At the last equity market peak in August of 2007 (orange line), there was little reward for moving out on the risk curve. After the great financial crisis of 2008, the compensation for incremental risk (blue line) widened to historic levels. Today’s capital markets (green line) offer a much narrower opportunity set, reminiscent of the August 2007 peak with the exception of Commodities, International Developed, and Emerging Markets stocks. These asset classes remain attractively priced, and we continue to overweight them across client portfolios.

read more>>

Second Quarter 2013: Chart of The Quarter

Emerging Market equities are the most attractive asset class in our valuation work. This chart illustrates that the normalized earnings for Emerging Market stocks (blue line, right hand scale) has continued to increase despite the flat price return since early 2010. As a result, the normalized earnings yield now exceeds 9% in real terms compared with 4% at the peak of the last cycle in 2007. Back then, investors were enthralled by the long-term secular growth outlook for emerging economies. Today, the same investors are full of apprehension and doubt. They point to inflation, political turmoil, and weak Developed Markets demand for exports. We, too, are cognizant of the near-term headwinds. However, we believe the valuation provides a significant margin of safety.

read more>>

First Quarter 2013 Investment Perspective: Chart of the Quarter

Investors have traditionally relied on three asset classes to protect against the real loss of purchasing power over time: Treasury Inflation Protected bonds, Real Estate (either direct or Real Estate Investment Trusts), and Commodities (both futures on physical assets and the equities of commodities producers). In the chart above, we highlight the changes in forward-looking expected real returns on each. As nominal yields on Treasurys have declined below the break-even expected inflation rate, TIPS now offer a negative real rate. Likewise, as investors have sought yield instruments across the equity spectrum, REIT yields have been pressured to historic lows. By contrast, commodities and stocks of commodities producers have become increasingly attractive. Concerns over global growth (particularly from resource-intensive China) have dampened investors’ outlooks for producers and physical commodities. We never subscribed to the commodities super-cycle. However, we now view commodity-related stocks as attractively valued among global equities. Further, the fundamentals of many commodities—whether marginal costs of production, inventories, or the discounts of forward prices to spot markets—look dramatically improved. We have increased our strategic weights to the commodities complex in client accounts.

read more>>

Foiling the "Murder": OCIO to The Rescue

The financial media, including Pensions & Investments, FundFire, Barron’s and Institutional Investor, have written about the rapidly growing OCIO marketplace, and a simple Google search for "outsourced CIO" yields more than 550,000 results. At least two respected industry observers (Casey Quirk and Charles Skorina) have made commendable efforts to describe OCIO for two audiences: investment firms trying to understand the landscape and potential OCIO clients who want to consider their options.

In recent years Hirtle Callaghan has been recognized as the pioneer of the OCIO industry (in August 2011 Pensions and Investments dubbed our CEO, Jon Hirtle, the Oracle of Outsource).  As the firm that started it all, we want to offer our own perspective on the critical role of the CIO and how to differentiate among firms offering OCIO services

read more>>

Fourth Quarter 2012 Investment Perspective: Chart of the Quarter

As U.S. Equity Markets approach their historic peak levels, it’s important to bear in mind how different valuation levels are now when compared to the levels that prevailed at past peaks. When the Standard & Poor’s 500 Index first approached the 1500 mark in late 1999, the Index traded on a price/normalized earnings ratio of 36.7. At the next peak prior to the Financial Crisis of 2008, the same ratio was a more modest 22.2. By contrast, the current market implies a valuation of 17.7 times normalized earnings. While not a historic bargain, it represents a far less demanding view of future earnings power.

read more>>
First name:
Last name: