The top conversations on APViewpoint last week were started by Larry Swedroe and Adam Butler. They generated thoughtful discussion with wide ranging opinions about whether preferred stocks are an alternative to safe bonds, and the benefits of adaptive asset allocation.
Larry Swedroe’s Are Preferred Stocks an Alternative to Safe Bonds? received comments from advisors commending him for his recent article reviewing the risks associated with investing in preferred stocks. Advisors found Swedroe’s analysis of the iShares U.S. Preferred Stock Fund (Ticker: PFF), the largest ETF with exposure to preferred stocks, to be an excellent commentary. They also agreed with his conclusion that high yield is not a sufficient justification for investing in preferred stocks, and that individual investors should be wary of preferred stocks because their risks include “perpetual life (or a very long maturity), a call feature, low credit standing, deferrable dividends and, for traditional preferred stocks, a depressed yield because of the demand from corporations that receive favorable tax treatment.” APViewpoint members also discussed the risks associated with other higher-yielding alternative forms of fixed income investing. They analyzed convertible bonds, and suggested that investors avoid them because of shifting allocations and call risks. Instead, some recommended, investors seeking higher returns should increase their equity allocation or increase their exposure to higher-expected-return equity assets.
ReSolve Asset Management CEO Adam Butler completed his four-part webinar series on September 22 with his final presentation on tactical asset allocation, Adaptive Asset Allocation: A Dynamic Strategy for Good Times and Bad. In this webinar, Butler explained how skilled investors can profit from an active multi-asset "factor" strategy called Adaptive Asset Allocation (AAA). Butler showed advisors how they can use a multi-asset factor strategy with methods adopted from Modern Portfolio Theory to create dynamic global portfolios that can “thrive in good times and bad.” He also introduced a framework for analyzing the robustness of factor strategies, and used AAA as a case study. Butler answered questions about his presentation in this follow up conversation. He explained how the AAA methodology differs from first-generation global tactical asset allocation strategies, and noted that AAA targets a specified level of portfolio risk to ensure investors have a consistent risk experience in all market conditions. He also answered questions about factor investing, and provided an analysis of both cross-sectional and time-series momentum. If you missed the live event, you can view a replay of the webinar here.
APViewpoint will be hosting its next CE eligible webinar, Behavioral Finance: Insights for Improving Client Acquisition and Retention, Thursday, October 6, at 4:15 pm ET. In this presentation, recognized behavioral market strategist Rick Bensignor will introduce advisors to the field of behavioral finance, and will help them understand how they can incorporate it into their client cultivation practices. You can register for the upcoming webinar here.
Marianne Brunet is a financial markets analyst with Advisor Perspectives.
