Search results for: Financial Times Top 300 Advisors

FT 300: Top Registered Investment Advisers

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We are honored to announce that our firm, Ritholtz Wealth Management, has been named to the FT 300 list for 2017. This is a ranking of the top 300 registered investment advisers in the United States according to a comprehensive set of metrics developed by the Financial Times. The list is merit-based, and selects only the best in firms in each state according to that methodology.

For a young firm like ours (we are not quite 4 years old) it is an honor to be included. I am blessed to work with some great partners in Josh, Michael, and Kris; we have a wonderful staff, and a great group of professional advisors, CFAs and CFPs. What we do is the result of a team effort — RWM is a true ensemble practice.

Our goal is to continue delivering the finest services we can to our clients around the nation. We are fortunate to have an engaged, thoughtful and fascinating group of people as clients. We try to live up to the high standards and expectations you hold for us every day.

We are grateful to be included. See you there tonight for a drink . . .



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Video-O-Rama: Figuring out the lie of the financial land

Video-o-rama: Figuring out the lie of the financial land

In addition to more “Outlook for 2009” videos (dealt with in last week’s Video-o-rama), the past week saw material covering a hodgepodge of topics. Although the topics were varied, good viewing material was produced, with the likes of Marc Faber, Peter Schiff, Martin Feldstein, Barton Biggs, Jeff Saut and Bill Gross in attendance.

A few of the more interesting clips that attracted my attention are shared below, including a few items warning about a bubble in government bonds.

But before we get to the economy and the financial markets, please spend a few minutes viewing a worthwhile three-part production by the Wall Street Journal entitled the “End of Wall Street” – What happened? Why did it happen? And what happens next?

The Wall Street Journal: End of Wall Street
Chapter one: What happened?. In the first of this three-part series, Journal reporters explain how the housing bubble inflated and burst, and why easy money led to the collapse of Wall Street’s biggest financial institutions.
Click here or on the image below for Chapter one.

Chapter two: Why did it happened? What was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called ‘weapons of financial mass destruction’.

Click here for Chaper two.

Chapter three: What happens next? This final chapter of the crisis on Wall Street tells the story of the $700-billion bailout, as seen through a reporter’s eyes, and looks at what’s ahead for the global economy.

Click here for Chapter three.

Source: The Wall Street Journal, January 5, 2009.


About Barry Ritholtz


Barry L. Ritholtz is co-founder, chairman, and chief investment officer of Ritholtz Wealth Management LLC. His focus has long been how the intersection of behavioral economics and data analysis affects investors.

Launched in 2013, RWM is a financial planning and asset management firm, with over $1.1 billion dollars in assets under management, offering Financial Planning and Wealth Management to the investing public. In 2017, RWM was named ETF Advisor of the Year. In 2019, the firm was named to the Financial Times Top 300 Advisors in the US for the 3rd consecutive year. It is the 4th fastest-growing RIA in America, according to Financial Advisor magazine.

Ritholtz has long been a frequent critic of the excesses of Wall Street and the failures of the press in its coverage of finance. Named one of the “15 Most Important Economic Journalists” in the United States, he has been called one of the 25 Most Dangerous People in Financial Media. He writes a daily column for Bloomberg Opinion (2013- ) and previously, a twice monthly column on Personal Finance and Investing for The Washington Post (2011-2016).

“To say that Barry Ritholtz ‘pulls no punches’ is like saying that Joe Louis had a nice right cross.”-Jesse’s Café Américain

Ritholtz is the creator and host of Masters in Business, the most popular podcast/show on Bloomberg Radio. In 2018, MIB had over 7 million downloads of the 60-90 minute conversation with many of the most important people in business and finance. The ground-breaking podcast quickly set the standard for business interviews, and helped “podcastify” Bloomberg. You can learn more about MIB here.

Ritholtz has been called the “blogfather” for his long-standing finance weblog, The Big Picture. TBP generates 1-2 million page views per month, and has been covering everything investing related since 2003. The blog has amassed ~150 million visitors over that 15 year period. Media accolades include TED named TBP one of top 100 Websites You Should Know and Use; TBP was featured in the 10th annual New York Times magazine “Year in Ideas,”(DIY Economics); Numerous traffic sites rank The Big Picture as one of the most trafficked Markets/Economic’s blogs on the web.

“For a guy with a small investment business, Barry Ritholtz of Bloomberg has a huge voice. He is unusually brief and cuts through market nonsense and bad investment management practices. He has a nose for BS. And America’s market jabber overflows in BS.”  –Ken Fisher

In 2008-09, Ritholtz wrote the book Bailout Nation, published by Wiley in 2009; with an updated paperback released in 2010. Bailout Nation became the best reviewed book on the bailouts, with NYT calling it “Irreverent,” and “an important book about a complicated subject, and yet you could still read it at the beach.WSJ noted “If you want to know how we got into this mess and what might still be coming, this is the book for you.” Bloomberg praised it as “A valuable new contribution to our understanding of how we arrived at this sorry juncture.” Bailout Nation was named “Investment Book of the Year” by Stock Trader’s Almanac, and won a First Amendment Award for Outstanding Journalism: Best Book. Numerous media — USA Today, Miami Herald, Marketplace Radio — named Bailout Nation as one of the best finance/business books of 2009.

One of the few strategists who saw the the coming housing implosion and derivative mess far in advance, Ritholtz issued warnings about the market collapse and recession to clients and readers to seek safe harbor. Dow Jones Market Talk noted that “many market observers predict tops and bottoms, but few successfully get their timing right. Jeremy Grantham and Barry Ritholtz sit in the latter category…”  (A summary of major market calls can be found here). His observations are unique in that they are the result of both quantitative data AND behavioral economics, and a function of his unusual career path in finance.

A regular guest in the media, Ritholtz has been profiled in the Wall Street Journal’s Quite Contrary column (August 3, 2004; Page C3), and was the subject of several Barron’s interviews (December 8, 2008 and October 26, 2010). Ritholtz was honored to be the dedicatee of Stock Trader’s Almanac‘s 40th Anniversary edition in 2007 and the Yahoo Tech Ticker’s Guest of the Year in 2009.

Mr. Ritholtz performed his graduate studies at Yeshiva University’s Benjamin N. Cardozo School of Law in New York, focusing on Economics, Markets and Corporate Law. He was a member of the Law Review and graduated Cum Laude. His undergraduate work was at Stony Brook University, where he focused on Mathematics and Physics, but graduated with a Bachelor Arts & Sciences degree in Political Science. Surprisingly, he was a member of the Stony Brook Equestrian Team, and competed successfully in the National Championships (1981) of the Intercollegiate Horse Show Association. In addition to writing the National Affairs column for the campus weekly (The Stony Brook Press), he was elected Vice-President of the student body. (Ritholtz goes into detail here: My Bizarre Academic Career)

He sits on the Board of Advisors of Riskalyze (creating quantitative measurements of client risk tolerances) and Peer Street (a marketplace that provides unprecedented access to high quality real estate loan investments). He is also an investor in StockTwits, a Twitter based stock community.

When not bemoaning the New York Knicks‘ all-too-frequent offensive lapses, Mr. Ritholtz is a vintage sports car enthusiast. He and his wife Wendy, an artist and teacher, live on the North Shore of Long Island, New York with their monsters Teddy and Jackson.

Transcript: Tim Hockey, Tom Nally, TD Ameritrade


The transcript from this week’s MIB: Bonus Pod: Tim Hockey, CEO / President of TD Ameritrade & Tom Nally, President of TD Ameritrade Institutional is below.

You can stream/download the full conversation, including the podcast extras on Apple iTunesBloombergSpotifyGoogle PodcastsOvercast, and Stitcher. All of our earlier podcasts on your favorite hosts can be found here.



FEMALE VOICEOVER: The Masters in Business podcast is brought to you by Invesco. Every day, we bring together ideas with technology, data with inspiration, investors with solutions. Let’s invest in greater possibilities together. Find out more at Invesco Distributors, Inc.

MALE VOICEOVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week, we have an extra special bonus podcast. Last month, I went to the TD Elite LINC Conference which is a small gathering of about 200 advisory firm executives that run over $300 billion.

This is an annual event. It goes from city to city each year. This year, it was in lovely Dana Point. If you know that part of California next to Laguna, it’s just spectacular oceanfront as lovely a location for a conference as you’ll find.

I had the privilege of interviewing Tim Hockey. He is the CEO and President of TD Ameritrade, a company that serves both individual investors and independent RIAs. They have total client assets of about $1.3 trillion as of the end of the second quarter 2019.

They are the custodian of choice for a number of already RIAs. They are one of my two custodians. We work with TD and Schwab at RWM (ph).

And the other person I interviewed was Tom Nally. He is the President of TD Ameritrade Institutional which provides custody and brokerage services to more than 7,000 independent RIAs. That’s about $650 billion under custody.

This is very much an inside baseball conversation. If you are an RIA, if you are interested in the investment management or financial planning business, then this really is inside baseball stuff that is must listen.

So, with no further ado, my interview with Tim Hockey and Tom Nally.

So, a real brief introduction, when I was doing the homework for this, TD manages or custodies 1.3 trillion in total client assets, 860,000 average client’s trades per day generating about 1.5 billion revenues a year, that is a really substantial set of data and it says a lot about what this organization is about.

So, let’s start with some questions beginning with Tim. So, what does it mean to be a CEO of such an enormous organization? How these challenges differ from other roles you’ve played within the company?

TIM HOCKEY, CEO AND PRESIDENT, TD AMERITRADE: Well, I was at the advisory panel this morning and I said that it’s now been three and a half years since I took on the job as CEO. And having come from the TD Bank in Canada, it’s pretty dramatic difference.

The dramatic difference is you know the phrase the buck stops here, you feel that in spades in this job and this role in particular. An enormous sense of responsibility to all of the constituents, it doesn’t matter whether it’s your associates or your clients or your shareholders or frankly, the communities that all of our people are working.

It’s just that sort of don’t want to let people down I guess is the largest issue with this. The biggest shift from the job if you graduate into this role and the CEO role you get promoted in is literally the time horizon. Your time horizon by definition has to shift out if you want to geek out on management duty (ph) for a second.

The basic premise is organizational hierarchies, the levels of an organization, six, seven, eight, nine whatever it is, they all depend on what sort of time horizon you have. So, if you’re a bank teller, you’ve got a time horizon of one day, right? It’s your shift.

If you are processing a piece of paper as an administrator, it’s a one-day time horizon. If you’re an entry-level supervisor, that second level, then it’s a very short period of time probably a week, maybe a couple of weeks. As you go up the organization, your time horizon has to shift out.

So, if you go from Tom’s level, six, seven levels in the organization, you can have a time horizon of saying how do I transform the institutional business with five to 10 years of time horizon.

And then at the CEO at the firm level, you should be running from 10 to 20 years and that means you’ve got to trying to keep all your balls moving to be able to hit those objectives all along way out with a lot of variabilities. So, anyway, enough geeking out but that’s the biggest drift in this job.


Transcript: Luis Maizel



The transcript from this week’s MIB: Luis Maizel on EM Bonds is below.

You can stream/download the full conversation, including the podcast extras on  iTunesBloombergOvercast, Apple Podcasts, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.




BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: Masters in Business is sponsored by First Republic Bank, grad school is hard, landing a great job is hard, refinancing your student loan debt doesn’t have to be hard. First Republic makes it simple. Low fixed rates and exceptional service. It’s as simple as that. Visit today.

ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: This week on the podcast, I have a special guest. His name is Luis Maizel and if you are at all interested in a couple of areas of asset management and allocation, you are going to find this to be really quite intriguing. He set up a firm 30 years ago to make emerging market fixed income investments, and LM Capital Group has been doing that for the past three decades.

They basically do their own due diligence, they check out all of the various bonds that they buy on behalf of clients, not relying on the traditional rating agencies and they’re essentially 99 percent owned by their employees. It’s a very interesting shop and Luis does a wonderful job explaining why emerging market debt has really become an asset class into itself given how soft actual yields are and that half of the sovereign wealth at these days, over $9 trillion, is actually holding a negative yield.

He thinks EM debt is going to be a not only a distinct asset class but it’s going to attract a lot of capital over the next decade and he’s very bullish.

So with no further ado, here’s my conversation with LM Capital Groups’ Luis Maizel.

My special guest this week is Luis Maizel, he is the cofounder and senior managing director at LM Capital Group, an emerging market fixed-income shop managing over $4.2 billion in assets, the firm was founded in 1989 and is privately held, it is 99 percent employee owned and provides a fixed income active management approach with a global macro overlay.

Luis Maizel, welcome to Bloomberg.


RITHOLTZ: So you launched this firm in 1989, you’re pretty much in the middle of a giant bull market, what made you decide to go into bonds instead of stocks?

MAIZEL: I started a second firm, Barry, actually a first firm, LM Advisors which was managing money for high net worth individuals, 1984, July 18th of ’84, the US eliminates the 30 percent withholding, up to then, foreign nationals could only invest tax free in T-bills or in bank CDs. All of a sudden, they opened up the market, a lot of US brokers fly out to Mexico City and tried to grab some of that money. And my friend started to call me saying you’re in the states, we know you, why don’t you help us serve through this new market?

So we did. For five years, we were managing high net worth individuals but they were being managed like venture plans because they were mostly tax exempt, and from there we jumped into the institutional market.

RITHOLTZ: So that was 1989, but you bring a very different perspective to the management of the assets, how did growing up outside of the United States shaped your view of the world be it developed or emerging markets?

MAIZEL: Think of it as planets. People in the US think that they’re sitting in the sun, the US is the center of the universe, for us foreigners we see the US as the biggest planet but it’s part of the system so it’s very interesting to see the impact of the US on the other planets but it’s not the center of the universe, it is just the biggest planet in the universe.

RITHOLTZ: And now we have China becoming another very large planet, how is that going to impact the way the US is perceived?

MAIZEL: I think the US is still by far the most important country in the world, the Chinese just because of the sheer size of population, over four times bigger than the US would be very big but in the income per capita, they’re still very small compared to the US, and the model of growth which was export to the US makes them smaller when you are gearing to become the big when you’re far away from it.

RITHOLTZ: Quite interesting. So academic studies have shown that passive management of stocks has a tendency to outperform active over long periods of time, but the opposite seems to be true in the fixed-income department, active fixed income strategies outperform passive, why is that?

MAIZEL: Well you have a choice on what bonds you buy. The bond market basically is like a landmine, if you don’t step on a min, you’re going to do okay and the move along the yield curve will allow you to react faster to what’s happening in the economy.

The passive — the index does not take into account the macro impact that’s happening in the bond market.

RITHOLTZ: So how do you go about creating a macro overlay for fixed income investing?

MAIZEL: That has always been our approach, Barry. We analyze — for us, money is a commodity, when it is scarce, it’s expensive, when it’s plentiful, it’s cheap, so we analyze, we developed a matrix in a going from a qualitative process to a quantitative way of processing is not easy, if you put three economists in a room, they are going to come out with four different theories, probably all of them wrong, so what we try to do is doing our macroanalysis starting the growth of the countries, growing, understanding the inflation, the economic indicators, we assign a value to each of them, we created a matrix which gives us a point count and we got the trend score which allows us then to going to the benchmark we are using which the client is requesting this to use and the trend score would give us how long or short the benchmark do we want to be.

RITHOLTZ: So when you say trends, I tend to think of equity trends where a market or stock is trending either higher for a long period of time or trending lower for a long period of time, do you have the same meaning of the word trends in fixed income or does it have a slightly different meaning.

MAIZEL: I think it is pretty similar but what you’re trying to understand is the current and future needs of money. If a country is growing very fast, you know there’s going to be competition for money, if the deficit of the country is big, you know that the government is going to place bonds and is going to siphon out money from the economy, if unemployment is very high ,then you know that there’s not going to be a lot of need, there’s not going to be brick-and-mortar investment, so money will be plentiful and rates are going to come down.

So there is a trend of what’s happened in the past 12 months that will impact probably what will happen in the six or 12.

RITHOLTZ: So when we look at the great bull market in bonds in the US from the days of Paul Volcker breaking the back of inflation in the late 70s early 80s, we’ve enjoyed a – I don’t know, let’s call it 33, 35 year bull market in bonds, is that still in effect?

And second, how does that bull market in bonds in the US affect the rest of the world?

MAIZEL: We were in a secular trend towards lower rates, there was an enormous addition of liquidity into the system coming not only from the states but from all central banks, the European Union was placing an enormous amount of money in the system, so was the Bank of Japan, so was China. A couple years ago, we saw the reversal in the trend, the announcement of the reversal of the easing, the quantitative easing, and the announcement by the Fed that they were going to start raising rates created a mentality that we had he have hit bottom and we were starting to trend upwards.

But now, we have seen that stopped, I think that the issue of an upcoming recession, I don’t believe it’s going, it’s a little bit like the wolf you know everybody keeps crying the wolf is coming, we’re not accustomed to a long period without a recession but ever since globalization started in the world, the whole theory changed, the formula of the past is no longer applicable.

RITHOLTZ: So would you say tales of the death of the bond bull market have been greatly exaggerated?


Transcript: Bill Bernstein




The transcript from this week’s MIB: William J. Bernstein, Efficient Frontier is below.

You can stream/download the full conversation, including the podcast extras on  iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.



ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, BLOOMBERG RADIO HOST: This week, on the podcast, I have an extra special guest, William J. Bernstein, author of so many fascinating books about finance, as well as being a practitioner. Efficient Frontier Advisors run a nice log (ph) of money for ultra-high-net worth clients.

What’s so fascinating about Bernstein is how he began his career as a neurologist and then transitioned to being a financial theorist and money manager and book author. Really, an amazing career path and a fascinating conversation. With no further ado, my conversation with William Bernstein.

I’m Barry Ritholtz. You’re listening to Masters in Business on Bloomberg Radio. My special guest this week is William Bernstein. He began his career as a neurologist, before becoming a financial theorist and investment advisor. He’s the author of nearly a dozen books, many of which cover finance, including “The Intelligent Asset Allocator,” “The Four Pillars of Investing,” “The Investor’s Manifesto,” and several others.

He has also written several works of historical interest, including “A Splendid Exchange,” all about global trade, “The Birth of Plenty,” as well as “Masters of the Word.” William Bernstein, welcome to Bloomberg.

WILLIAM BERNSTEIN, AUTHOR: Happy to be here, Barry.

RITHOLTZ: So I’ve been looking forward to this conversation for quite a while. You and I have been e-mailing for several years. You have such a fascinating background and so unusual. Before you became a professional investor and an author, you were a neurologist. How long did you do that for? And what made you transition into finance?

BERNSTEIN: Well, I did it, more or less, for a third of a century. And I transitioned into finance and non-fiction writing, by virtue of the fact that I live in a country that doesn’t a functioning welfare system. And so, I had to save and invest on my own, and I approached the problem in a way that I thought that any person with scientific training would do, which is that you examine the peer-reviewed literature.

You read the basic texts. You collect data. You built models. And this got me to about the mid-1990s, and by that point I realized that I had created something that was actually of use to small investors. And so, I began writing finance. And as I’m sure we’ll get into later in the interview, one of the central skills that any investor should have is a working knowledge of financial history. And I discovered that I enjoyed writing history. And so, I segued into that.

RITHOLTZ: Do you miss medicine at all?

BERNSTEIN: I miss the camaraderie. I miss dealing with the personal interaction with patients, which is golden. And – and you know, I miss the knowledge and the competence that you exert. But the day-to-day practice does wear on you after a while. And there comes a point, I think, in every doctor’s career when – or at least most physician’s careers when they decide to call it quits.

RITHOLTZ: So one of the things you did – you mentioned data – you assembled an asset class database before they were really available publically. Why did you go about doing this? And where did you get your data from?

BERNSTEIN: I basically begged people for – for data. And I just collected as many data series as I could. And I wanted to basically create what’s called a mean variance optimizer, which is something that trades off return and risk, measured as standard deviance or variance.

And as much data as you can throw into it is good. And so, that was why I collected all of those data. Now, it turns out that that sort of exercise is a fool’s errand, as I very quickly figured out. But it’s still a useful skill, and it was a useful thing to do for small investors.

RITHOLTZ: Why is it a fool’s errand? Other than the fact that the data is relentless and it never stops.

BERNSTEIN: It’s a fool’s errand, because the output of mean variance optimizer, that is one of the most efficient portfolios, giving you the most return for the least amount of risk, or vice versa, giving you the least risk for a given amount of return is extremely sensitive to the data you put into it. So change the return of an asset by a percent or 2 in either direction.

And it might completely dominate a portfolio, or it might completely fall out of the portfolio. These things started to come on to people’s desktops in the early 1990s. And when they tossed in historical data, what did they find? Well, they found that the most efficient portfolio were heavy in Japanese stocks and precious metal stocks. Case closed. That’s all you have to know. And –



Transcript: Roger Ibbotson

The transcript from this week’s MIB: Roger Ibbotson of Yale, Ibbotson Associates, and Zebra Capital, is below.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, wow, what a delightful conversation I had with Roger Ibbotson. If you don’t know who he is, well, you need to become a little more familiar with financial histories, he is one of the founding fathers about modern thoughts on asset allocation, portfolio, management valuation factor, go down the list of a million things, he really was instrumental in the development and expansion of CRSP which is the joint stock database originally out of the University of Chicago.

Davidson Associates, he’s on the board of advisors at Dimensional Funds, his curriculum vitae as his pages and pages long, he was extremely generous with his time and shared all sorts of fascinating things with us.

If you are at all a stock market wonk, if you are at all interested in why some stocks go up and others don’t, then you are to find this conversation to be absolutely fascinating. So with no further ado, my conversation with Yale University’s Roger Ibbotson.

This week I have an extra special guest his name is Roger Ibbotson, he is a professor at the Yale School of Management where he is Professor of Practice Emeritus of Finance, he is also the Founder and Chairman of Ibbotson Associates which was sold not too long ago to Morningstar, he is on the Board of Directors of Dimensional Fund Advisors, he is the chairman and CIO of Zebra Capital Management, an equity investment and hedge fund manager, he has also taught all for many years and served as executive director for the Center for Research in Security Prices better known as CRSP.

He’s the author of numerous books including “Investment Markets, Gaining The Performance Advantage”, and “Global Investing The Professionals Guide To The World Of Capital Markets” Roger Ibbotson, welcome to Bloomberg.


RITHOLTZ: I’ve been looking forward to having this conversation with you for a long, long time, I’ve certainly been familiar with Ibbotson and Associates, since you founded them back in 1977, but let’s go back to your days when you got your PhD from Chicago, what was the state of the world in finance like when you first entered the markets?

IBBOTSON: Well, you know, it was really, things were happening at the University of Chicago and ultimately many of the people that got Nobel Prizes for what went on, so but if you just take us back a few years before that, finance really hadn’t developed as an academic subject or as a security analyst or how to pick a stock or something like that.

And then we started really developing a whole theory of how finance works, and I got to say I had great people to work with there, my chairman of my committee when I wrote my dissertation was Eugene Fama, he won a Nobel Prize, I had on my committee, Merton Miller, he won a Nobel Prize, at Myron Scholes won a Nobel Prize, Fischer Black, you have to be alive to win a Nobel Prize, unfortunately, he died before that but he certainly would have, so it was really a tremendous group of people to work with.

That’s a 1926 Yankees murderers row of Nobel Laureates there.

IBBOTSON: Yes. So yes, it was a wonderful time going on, so actually all the – so many different discoveries were taking place.

RITHOLTZ: You mentioned that the study of finance really hadn’t developed academically as much as it has since, tell us about the Center for Research in Security Prices for CRSP, how did that come about and what was your involvement?

IBBOTSON: So the Center for Research in Security Prices, we call it CRSP — C, R, S, P, while CRSP was really set up by James Lorie and Larry Fisher and they were collecting data on the stock market returns, and the data started 1926 and now you see a lot of things start in 1926, so they were collecting this data and that’s what started the center and I got to say that once they published this data, they never kept it quite up-to-date, but once they published it, was people were so interested because they had no idea what actually would had happened in the stock market, they didn’t actually have any sense for what how stock market returns were like.

In fact, I kind of remember the 30s and how terrible it was and so forth and they knew things were better lately, but they still did realize the high returns that actually had happened in the stock market.

RITHOLTZ: That’s quite fascinating, so when you say this was not much of an academic study are you really referring to the fact that previous to the creation of crisp, there wasn’t a whole lot of data that could be analyzed at least not consistent data in anything approaching a well structured way?

IBBOTSON: Yes, CRSP really put the data on the map and then when I got my PhD or the PhD there but actually stayed on as a professor, and when I stayed on, I became the Executive Director of CRSP. So I was and I guess helping to put the data together and it was really not only the University of Chicago that was using the data but all the other universities were really using that data.

So this suddenly finance became an empirical subject that people could study.

RITHOLTZ: That’s the word I was hunting for, it had no empiricism previous, this was — what years did you begin with the CRSP?

IBBOTSON: Well, I got there as a student in 1968 and became a faculty member in 1974 and I guess I became Executive Director I don’t remember, a few years after that of the center, but I was always involved with CRSP from the start because I was always interested in data and in fact, I get a job while I was getting my PhD in the investment office of the University.

RITHOLTZ: The endowment in other words.

IBBOTSON: The endowment right, I was a consultant to the office and one of the things they asked me as a consultant was “What do we do with his bond portfolio?” And I said “Well, I can manage that” and so they actually had a PhD student that was actually managing the University of Chicago bond portfolio.

RITHOLTZ: And how large was that at the time?

IBBOTSON: Well, these numbers were not large in today’s time, a couple of hundred million you know.

RITHOLTZ: But still, a PhD student is like “Okay, congratulations, you’re running a few hundred million dollars.” That’s not nothing especially in the late 60s.

IBBOTSON: Yes, and it was a great thing to do and it gets back to what you’re talking about when people – once I was running the bond portfolio, people would ask me “When are Fisher and Lorrie going to update the study?” Because the first data came out from 1926 to 1960 and then it was the 1926 to 1965, and then 1968 but this was ’72, ’73 and people were asking “When do I see the updated data?” and I would ask Larry Fisher when it’s going to get updated and Larry would give me a date but the date would go by and it wouldn’t get done and so this is what I really took the ball by our hands, I worked with Rex Sinquefield who was a …

RITHOLTZ: Oh sure.


IBBOTSON: A student of mine at the time and we decided to put this — put data that literally all the — we used the Center for Research prices but we put up some quicker data together to get a sense of what – something up-to-date actually and where we brought it up to date actually through 1976 at the time.

RITHOLTZ: So that brings us to 1977 which not coincidentally is when you launched Ibbotson Associates, tells about what motivated you to go out and hang your own shingle?

IBBOTSON: Well, it was “Stocks, Bonds, Bills and Inflation”, I was an assistant professor and we’re just — we had just published “Stocks, Bonds, Bills and Inflation” first as a couple of journal articles and one which is on the bathroom (ph) actually predicted n the future long-term ,but then also as a monograph from the CFA Institute and everybody was so interested that I was getting inundated with letters coming in CEOs asking me for information and response of this question that question and I was at a — I barely had a secretary, had a part of a secretary and I didn’t know what to do with all these letters from these CIOs, CEOs and CIOs and so forth.

So I started hiring a couple of people to help me out with this and that’s what caused me to actually start the consulting – I had plenty of business at the start because so many people are actually requesting things from me.

RITHOLTZ: You sold Ibbotson Associates and Advisers to Morningstar back in 2006, pretty good timing before the tide went out in ’08, ’09, what was that process like? They’re a pretty big shop, Morningstar, how did that transaction go?

IBBOTSON: Well in 2006, by that time, I was already at Yale School of Management as a professor in practice there, but in 2006, we had 150 people at Ibbotson Associates Offices in Chicago and New York and Tokyo actually, but still we were very small compared to Morningstar.

RITHOLTZ: Yes, they’re giant also in Chicago, right? Aren’t they…


IBBOTSON: They weren’t very far, they were just – we were like two firms that were somewhat similar that were only a couple blocks away from each other.

RITHOLTZ: That’s a pretty natural fit that the large Morningstar will acquire the smaller Ibbotson in the same hometown.

IBBOTSON: Well, actually, I got to say that we were around first because I remember when Joe Mansueto in the 1980s came to a few of our holiday parties and things like that and but I got to say, you have to give Joe Mansueto credit, Morningstar really took off and grew, we were going fast too, but nothing like they were like.

RITHOLTZ: Well, you focused on data about markets generally, they focus specifically on mutual funds and that became a giant growth area for them especially with the ERISA laws and 401(k) coming up in the early ’70s.

IBBOTSON: Well, everybody was – ERISA was more, yes 401(k) really start developing and that really in the 1980s, first thing was a defined venture — defined-benefit pension plans, the DB plans and we worked with them to some extent but Morningstar actually picked the retail end of it with a 401(k) market and the mutual funds, yes.


IBBOTSON: And so, but we are two very fast growing firms that were alongside each other for a couple decades in Chicago before they actually bought us out.

RITHOLTZ: Quite intriguing, let’s talk a little bit about CRSP and we mentioned earlier you worked on the 1926 to present database of stock market returns, but not too long ago, a new historical database was added for the New York Stock Exchange going back to 1815 straight up to the original 1926 date. What did you learn from that database about equity returns and about volatility?


Transcript: John Chisholm, Acadian Asset Management


The transcript from this week’s MIB: John Chisholm, Acadian Asset Management, is below

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.


ANNOUNCER: This is Masters in Business with Barry Ritzholtz on Bloomberg Radio.

BARRY RITHOLTZ, BLOOMBERG: This week on the podcast I have an extra special guest. His name is John Chisholm and you might not have heard of him, despite the fact that he is the Co-CEO and Former Chief Investment Officer of Acadian Asset Management, which runs nearly $100 billion in institutional money all around the world; most of it is here in the U.S., but a healthy chunk, about a third is overseas money.

He has a fascinating background; an aspiring rocket scientist who worked at the MIT Instrument Labs before taking a gig at State Street and then eventually him and his partners launched Acadian about 32 years ago. They are a quantitative shop and have a very, very interesting approach, combining essential fundamental factor models into a quantitative system and it’s really very, very interesting. They’ve put together quite a fascinating track record over time.

If you are at all interested in quantitative approaches, factor-based investing, Big Data, artificial intelligence — the way to approach markets from a data-driven perspective, then I think you’re going to find this conversation absolutely fascinating. So with no further ado, my interview with Acadian Asset Management’s John Chisholm.


My special guest this week is John Chisholm. He is the Co-CEO of Acadian Asset Management. Previously he was Chief Investment Officer. Acadian manages $86 billion in almost 75 countries around the world. He began as an analyst at State Street Bank. Previous to that he was a Systems Engineer at Draper Laboratories, which really is a great place to start. John Chisholm, welcome to Bloomberg.

JOHN CHISHOLM, CO-CEO, ACADIAN ASSET MANAGEMENT: Hi, Barry. Thanks. It’s great to be here.

RITHOLTZ: So Systems Engineer at Draper Laboratories, which became known as the MIT Instrumentation Lab — is that right? How did you find your way from MIT to the Instrumentation Labs?

CHISHOLM: When I went to college my passion, what I was excited about was really building or designing spaceships. This was in the early ’80s, so I —

RITHOLTZ: So you were a rocket scientist, is that what —


CHISHOLM: I was a — I was a wannabee, an aspiring rocket scientist.


Exactly. And so I got my undergraduate degree, but I found my senior year, I was, I’d gotten really interested in investing and I was spending a lot of time mostly just reading about investment, you know, whatever it was; journal, business publications, journals and, when I decided, okay, what do I want to do now? I thought, well, I’d probably want to go back to grad school. Do I want to do finance? Investing? Business? Or do I want to do aerospace?

And I had an opportunity to apply to several different programs, so I had both; I had a finance opportunity and an aerospace opportunity and I thought, why don’t I try to test both out? I’ll get a full-time job here in the Boston area — the only place — there’s not a lot of aerospace jobs in Boston —


CHISHOLM: Draper Labs is one that works on guidance systems. So if you’ve got a satellite or a missile, you try to figure out, where is it going to go? How does it get there? Before GPS…


— had a guidance system. So I worked there fulltime and I got a part-time job, like sort of after-hours job working with a fellow named Gary Bergstrom, who was later one of my co-founders at Acadian. He’d been a portfolio manager at Putnam —


CHISHOLM: And in the ’70s and then he left, sort of off on his own, consulting for money managers; consulted at the time, his big project when I was working with him was for State Street; later State Street Mobile Advisors.


CHISHOLM: And we helped build and design their first International Index Fund — and then later on some international active strategies. So that was sort of a part-time job. I went back to — that made me decide — that was more interesting than the aerospace stuff I was doing at the time —


— that made me decide —


— (INAUDIBLE) go back.

RITHOLTZ: So that’s why, when you said to go back, you really started your first fulltime job in finance was as an analyst for State Street? Is that right?


CHISHOLM: So the State Street job was also a part time — that was also while I was at school, working for them for like — there was some time off in January and then the spring semester I worked for them as a potential employer. But in the end, Gary’s goal was to launch an asset management firm. Myself and we had another colleague, Churchill Franklin and another colleague, Ron (ph) Frazier — they all came aboard, we all came together about the same time, around 1987, when I graduated — and so we launched Acadian as an active money manager at that point in time.


RITHOLTZ: So that’s 32 years ago — an active manager, as well as a heavily… influenced by quantitative strategies. Is that a fair statement?


CHISHOLM: We’re a quantitative manager. We were all, you know, my background, aerospace engineering — all quantitative — Gary’s background — Gary had gotten a Ph.D. from MIT. So we were all very quantitative, but Quant at the time was not as sophisticated as what Quant today is.


Right? There wasn’t any machine learning. There wasn’t any Big Data. There was, you know, Little Data. There were statistics.


Right? So you know, what’s the average payoff to value? And how do we build a portfolio that captures that payoff? Very simple quantitative tools that we used back in the middle ’80s.

RITHOLTZ: So do you consider yourselves today an active manager of quantitatively — like I think about firms like DFA or any of the pharma fringe-based — factor models and they’re somewhere between active and a quantitative screening approach — how would you describe Acadian?

CHISHOLM: Describe us as active. So most of what we’re doing is highly active, potentially high tracking error against a benchmark. We have the flexibility, so we can build low-tracking error strategies. This ties into this concept of capacity; how much money can you manage —


— and still expect to add the value your clients are looking for? And typically the more money you manage, the harder it is to add value. So at lower, at levels of active risk, lower expected value added, you can manage more money. There’s some clients who are happy hiring managers for that. They’re also usually happy paying lower fees.


CHISHOLM: Right. So you really have to trade off both from a perspective of adding value and from a perspective of running a business — where do you want to be? Most of our strategies are highly active, but we have some that are shading more towards enhanced index.

RITHOLTZ: Mm-hmm. When you say “enhanced index” you’re taking a basic index and then adding a little flavoring to it, to move it away from the benchmark?

CHISHOLM: Yeah. So for example, we might say “enhanced index” would be if we have a tracking error of less than two percent; if we have one-and-a-half percent tracking error, it just means what’s the standard deviation of the expected returns —


— versus the benchmark. One-and-a-half percent tracking error would be enhanced index strategy; you might only expect to get one-and-a-half percent excess return associated with that net of fees. If we had a more active strategy, we might expect, we might see four percent tracking error. We expect to get about two-and-a-half percent active return net of fees.

RITHOLTZ: Mm-hmm. How do you avoid the challenge as Bill Miller described it, of active managers who charge active fees, but are effectively are closet indexers? How do you clearly differentiate —


— yourself from that group?

CHISHOLM: So there’s two parts to it. One is what’s under our control, what we can do. We can build portfolios that are active in the sense that they are very different; they look different from the benchmark. They have higher levels of tracking error. They have high active share.


CHISHOLM: The other part of that is the client’s job. So if the client hires 20 managers like that, they’re still getting close to back —


— back to an index.


Paying for Advice

The world’s first financial advisor is Joseph, son of Jacob. He is doing asset management for the Egyptian Pharaoh and he also kind of invents the very first national pension system.

Pharaoh’s assets are the lands themselves and the agricultural crop that can be produced from them. He is having nightmares about seven fat cows and then seven lean cows. Jacob, a prisoner at first, interprets these dreams to mean that seven bountiful years are coming but they will be followed by seven years of famine and pain.

Pharaoh appoints him as his financial advisor and allows him to commandeer a fifth of every Egyptian farmer’s harvest to comprise an emergency store of grain. When the famine begins, Pharaoh’s got the resources saved up to continue feeding his people, sort of like social security for citizens who are no longer able to earn a living. Joseph is paid in return for his advice to the ruler and his country – the Pharaoh tells him to send for his entire family and tribe of Jews from Canaan and to bring them to Egypt to settle a portion of its farm land.

Joseph guided the Pharaoh’s portfolio and saved his assets from ruin. In exchange for his crucial advice, he was paid an asset-based fee – a portion of the farmland.


As of August 1st, my firm’s tactical asset allocation portfolio, called Goaltender, has been 100% invested in US stocks for 25 straight months without interruption. Let me repeat that. This particular strategy has now gone 25 straight months of being 100% long US stocks. We take zero credit for having seen the any of the recent bull market coming in advance, as Goaltender is entirely rules-based and our own feelings do not enter into its allocation decisions.

We almost never discuss our tactical asset allocation strategies publicly (two rare exceptions here and here) and even in this case I won’t be (can’t be) getting into any details. But there’s a bigger point I want to make here…

First, some rhetorical questions:

How many other tactical strategies out there have been fully invested in US stocks since July of 2016 without any hedges or sales or “swings to cash” during that period?

How many investors would have run a strategy like this for themselves and stuck with it the entire time?

How many professionals can set up a rules-based strategy and then actually stick with it without making tweaks and changes.

How many tactical strategies were built from the premise of “how can we trade the absolute least amount of times each year and almost never do anything, yet still be considered tactical?”

Goaltender is the only tactical strategy I’m aware of that was built internally at a wealth management firm with the express purpose of managing investor behavior rather than trying to outsmart the markets, generate alpha or call tops and bottoms. Almost every tactical strategy we’ve seen in the wild is oriented toward impressing people, beating markets, making rapid moves and incorporating economic data, sentiment surveys, fundamentals and other bulls*** that doesn’t actually work.

Ours is designed to make the trade that clients can’t, at the moment they can’t. The trades they won’t make themselves. If we called clients a week after Brexit at the beginning of July 2016, with the controversial US election looming just a few months ahead, and said “We want you to go 100% long US stocks right here, right now, and hold them for the next two years straight, no questions asked,” the response would not have been great. Which is why we are discretionary managers, running these strategies ourselves.


There are several reasons why financial advisors overwhelmingly charge clients for their services as a basis point fee on assets as opposed to hourly or on a monthly retainer.

One of the major reasons is that, at the end of the day, the financial advisor is going to be held responsible for what happens with the client’s invested assets, regardless of whether or not the value-add on an ongoing basis is perceived to be the asset management or the financial planning work.

It’s also possible to say that during 300 days a year it’s the planning work that is worth the most to the client but during the other 65 days a year, it’s the asset management that’s going to make the difference. We don’t know in advance which days will be the 300 and which will be the 65. The thing is, what goes on during those 65 days might have tremendous implications for the financial plan – positive or negative.

You’re welcome to hold yourself out to clients as a financial planner, but the truth is that they’re going to judge you on the portfolio you recommend. Even if you don’t manage it yourself and turn it over to a TAMP. Even if you just default to a five-ETF portfolio using all Vanguard. Even if you recommend seven mutual funds and never make a change. Even if you charge solely for financial planning hours and do the asset management part for free. When all is said and done, you’re going to keep or lose a client based on that asset management someday, and you’re going to have to discuss it throughout the year come bull markets or bear. You’re going to have to defend it at times when markets prove unfavorable to how you’re allocated. You’re going to have to defend it in light of underperformance or whenever some hot, new idea comes along that clients want to compare with what you’re doing.

You may as well be paid for it.


As a financial advisor, you will own the asset allocation more than anything else, even if the personal relationship and the planning piece is a lot more meaningful than the fund selection.

This is regardless of what kind of people your clients are, what region of the country you serve, which type of firm you work at. That’s also your biggest risk – that someone is furious about how their assets have been allocated. Shouldn’t everyone in every profession be paid based on the thing that is their biggest risk? Why would a client want it otherwise? They’re handing you their money to invest in the portfolio that you recommend. If you do a bad job, they’re taking the money out of the portfolio you recommend. You have skin in the game now, in a way a retainer fee simply doesn’t capture. This is actually what clients want. The best evidence of that is the incredible shift in investable assets away from almost every other channel of wealth management directed straight into the RIA channel.

There are now 18,800 retail-focused (Registered Investment Advisory) RIA firms in America. 687 of them manage over a billion dollars and account for 60% of the industry’s total assets under management. These firms are the future. Trillions of dollars have moved to the RIA space. None of it at gunpoint, that I’m aware of.

People are voting with their dollars and their vote is for asset based fees in exchange for a relationship with a financial advisor who manages their portfolio.


I didn’t make it this way, I’m just telling you how it works in the real world. I’m sorry if this doesn’t align with how you feel it should be or what logic would dictate. Twenty one years in the game, my friends. When I see a reporter or a columnist opine on the compensation structure of financial advisors, I read it with an open mind. Perhaps there’s some merit to what they’re saying in some cases.

But then I remember that a true financial advisor doesn’t really earn their fees until the big moment. That moment where a client wants to double their exposure to technology stocks after a 500% rally they feel they didn’t get enough out of. That moment where someone with a thirty year retirement ahead of them is about to succumb to volatility and liquidate a stock portfolio after 8 months of a bear market. That moment where a client wants to shift to an all US stock portfolio precisely as international stocks are on the verge of going on a five year stretch of massive outperformance. That moment when a client is tempted to put five percent of their net worth into Bitcoin at $18,000 per…whatever, coin I guess?

And when these moments happen, the advice they get at that time is not simply worth a basis point fee. It’s worth everything. It could be worth a lifetime’s sanity every day thereafter. I’ve seen decisions made and consequences suffered the likes of which you couldn’t imagine. Between 2010 and 2015, we would come across at least one or two investors a week who had been miserably sitting in cash since 2008 and didn’t know what to do. None of these cases involved a client who had an advisor currently working with them. Hundreds of thousands of dollars in foregone gains (in some cases millions) had been left on the table due directly to the absence of professional help.

For those who have never been on the phone with a client – a human being – whose liquid assets and entire life savings are in a twenty percent drawdown, alarm bells ringing throughout the media and blood-red stock quotes everywhere they look, you really have no idea what fee is worth what amount, to whom, and why. If you’ve never sat with someone who is so utterly convinced that their family’s future and their freedom is slipping away before their very eyes, you probably don’t need to have a strong opinion about what they should or should not be willing to pay for help.


And for those who don’t understand why the financial planning work and the asset management work that advisors do are inextricably linked – why they are not merely a la carte items on a buffet’s steamer table, ready to be unbundled and consumed separately, in any particular order – I don’t know what to tell you.

I’m not sure how you can invest someone’s entire life savings without understanding how and when the money is ultimately going to be used. I’m not sure how you can construct a financial plan for someone and then act as though the way they reach their goals via the investment markets is somehow less relevant or worthy of attention.

Financial planning in the absence of an investment strategy designed to implement the plan is a f***ing fortune cookie. An investment portfolio absent the dictates of the goals from a financial plan is like building a house without a blueprint. Neither or these things is worth much without the other. But delivered in concert, they are essential and worthy of a fee for the people who are going to be overseeing both.


We don’t take requests. We’re not the wedding DJ.

People come to us and tell us what they want (or what they think they want) and it’s our job to show them what they actually need instead. If we’re talking to someone rational and intelligent, they get it immediately.

They’re relieved to be told what they should be doing rather than being presented with a menu of options. They’re excited about a future in which they can tune out virtually everything and focus solely on spending the money they’ve saved based on what’s important to them. They like having their financial information organized and presented in a way that illustrates possibilities and priorities. They like the peace of mind knowing that they’re making ongoing decisions in consultation with an advisor who understands their personalities, their spending needs, their tax situation, insurance coverage, estate plan and their future hopes and dreams. They also like having someone else be partly responsible for the burdens of investing large sums of money on behalf of other members of their family. The planning and the investing functions are integral to all of this value being created and enjoyed.

This is why the wealthiest, most successful people in America are working with wealth management firms and paying an asset based fee. It’s why they always have and they always will. Gladly.


Talk to us about portfolio and financial plan here. 




This post was originally published on August 9, 2018. at The Reformed Broker

10 Monday AM Reads

My morning train plane reads:

• You Can Time The Market, Just Not All The Time (Wall Street Journal)
• The Housing Bubble Burst All Over Reality TV (New York Times)
• Meet the Shalennials: CEOs Under 40 Making Millions in Texas Oil (Bloomberg)
• An Equator Full of Hurricanes Is a Preview of End Times (Wired)
• How much would the iPhone cost if it were made in America? (Vox)

Be sure to check out our Masters in Business interview this weekend with David Nadig, managing director of Previously, he was director of ETFs at FactSet Research Systems. Nadig helped design some of the first ETFs at BGI, and as co-founder of Cerulli Associates, he conducted some of the earliest research on fee-only financial advisors and the rise of indexing.

Continues here

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