Monday, October 20, 2014

Why Taxes And Trading Costs Kill Investment Returns

  for Forbes writes: Underperformance, high fees and tight regulations are creating an environment ripe for disruption. I am constantly on the lookout for innovative technologies and business models that address the inherent problems of asset management.  I recently had a conversation with a former colleague from Bridgewater Associates, Maneesh Shanbhag who founded Greenline Partners, a progressive asset management firm aiming to help investors keep a higher percentage of their returns by managing not only for performance, but also for tax and operational efficiency. A self-described engineer with a passion for efficiency and elegant simplicity, Maneesh defies the stereotype of a typical hedge fund manager.  Maneesh left a promising career at Bridgewater Associates where he advised institutional investors on portfolio allocation to be an asset management entrepreneur.  

Maneesh shares that he did not get into this business to get rich quickly but to create a back to basics investment model that generates value for his clients at a lower cost. He and his partners at Greenline currently manage $100 million of assets under management (AUM) for private investors and foundations and have consistently outperformed their peers on a post-tax bases.

Katina Stefanova: The two most overused terms in the investment management industry are probably diversification and long-term investing. Some investors think of diversification as holding lots of different funds. But more often than not, these funds tend to have similar exposures (e.g. large cap and small cap are still all equities) or worse hold many identical positions, and hence are not diversifying to each other at all. Similarly, the way investment managers urge their clients to invest long-term is by subjecting them to the huge swings of markets and begging them not to sell after losses. The latter approach is disastrous to investors. The result is often unsatisfied clients who end up selling their investments at the worst possible time (after large losses) and frustrated advisors and portfolio managers.  In this scenario, everybody loses. Diversification and thinking long-term are the most important concepts in investing but investment managers can do a lot more with properly applying these concepts and just as importantly educating their clients about what they really mean. What is Greenline’s approach to addressing these issues? [snip].  The article continues @ Forbes, click here to continue reading...