Endowment Fund Performance Numbers Posted

This past Friday I was catching up on some reading and research of industry periodicals that seem to pile up on my desk until I either read them – or discard them. A few interesting statistics caught my attention as I start to look to planning for 2017. Per Pensions and Investment Magazine – the largest educational institutional investors posted their annual portfolio returns for the year ending September 30th. The average returns posted was -1%. The best in bunch was Yale University which posted a positive return of 3.4%.

Since we are talking about institutional investors who oversee billions of dollars of endowments (Harvard is the largest at $34 billion) – one would think that these folks are the best and brightest in the country – if not the world. Negative 1% does not seem like it would take a lot of work to achieve.

In another article in Wealth Watch – they reported that the chances of earning an average of 5% on investment portfolios over the next 10 years is a whopping 0% – yes that’s not a typo. I am used to seeing probabilities of 5% or 94% – it’s rare to see a 0% probability. In the article they provided advice to those that have a ten year retirement plan window – save more to make up for the expected low returns.

For those readers that are clients or at least regular reviewers of my Monday Morning messages – it should be clear that my Safe Money Product message is not and never will be the answer to managing a portfolio. I profess that one should have a mix of investments from stock to bonds – to cash – to precious metals (if that’s your liking) – to real estate – etc. One could spend a lifetime arguing as to what allocation into these various holdings is optimal – in fact some in our society make a great living doing just that. I look at my products as compliments – not replacements – to one’s portfolio strategy.

What I feel is inarguable is that having a mix of alternative safe money products in a portfolio will lower the overall volatility (called beta) of one’s investment holdings. One of the reasons for this is by having consistent and known returns for some of one’s holdings – even if the returns are 5% – will even out the risk curve. Structured Settlements and Mortgage Notes can achieve these objectives fairly well.

I did some research of my own this past Sunday while waiting for the Eagles game to begin and although my research was basic and on a sheet of legal paper – I could calculate that over the last twelve months – ending September 30th – my clients have averaged about 5.75% on their Safe Money holdings. {I calculated this by taking the first 10 clients on the list who have Self-Directed IRAs with Provident Trust and compared their 9/30/15 balance vs. their 9/30/16 balance – I of course added back any withdrawals that were taken and subtracted out any additions that were added.}

As I continue to add different alternative safe money products to our offerings – my hope is to get those averages up a point or two without causing much more principal risk along the way. Stay tuned for more reports on how we plan to accomplish this objective.

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