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Jesse

Welcome to LC Diversified

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Welcome to LC Diversified!

 

We're excited to introduce a new broadly diversified multi-strategy portfolio called LC Diversified.

 

You can read a full a comprehensive overview of the strategy here.

 

Here are reasons to consider LC Diversified in your long-term portfolio:

 

1. Current market conditions and valuations for US stocks and bonds:  The more you pay for an asset, the lower its future expected returns.  History suggests a traditional long only approach such as 60% stocks/40% bonds has a high probability of producing below average returns over the next decade. This forces investors to plan accordingly or to consider an alternative approach.

 

2. Overall lack of understanding and objective content on alternative investment strategies:  Academically, many have accepted and teach the Efficient Market Hypothesis (EMH) as if it's fact instead of theory and therefore dismiss anything outside of index-based buy and hold investing.  While there is certainly substantial evidence supporting passive vs. active, we believe the reason simple index funds consistently outperform traditional active managers is primarily due to discipline.  The S&P 500 is a very simple set of rules that are applied over and over again. Traditional active managers rely on discretion in their decision making, and they charge too much. The objective of LC Diversified is not to compete with the S&P 500, but instead to provide a consistently profitable return stream independent of macro economic conditions for decades to come.  

 

3. A complete portfolio solution:  Many investors analyze a fund or strategy on returns alone with little if any understanding of how that may harm or benefit their existing portfolio.  Also, many investors are married to a single approach or theory and are unable or unwilling to consider how different strategies can complement each other in a portfolio. Investors often bring the same closely held beliefs to a discussion about investment management as they do to politics and other polarizing topics. Our approach is based on evidence (data) and common sense. The strategies within LC Diversified have been thoughtfully put together with the objective of providing someone a place to park their core long term investment capital.

 

Many  high quality systematic strategies that institutional investors have used for decades have largely been unavailable to the retail investor, but are now becoming available through more traditional investment vehicles like mutual funds and ETF's. For example, trend following managed futures CTA's have largely been only available to QEP's (qualified eligible person's meeting strict income and net worth criteria) over the last several decades but now several high quality managers are offering their strategies in mutual funds.  Trend following has been one of the best crisis alpha strategies for as long as financial data has been recorded.  Trend Following With Managed Futures provides data showing that trend following as an asset class has worked for 800 years.  LC Diversified specifically allocates a meaningful allocation to high quality trend following trading managers.  We have a specific topic to discuss this part of the portfolio along with the other quantitative investment methods that include risk parity, momentum, value, and long/short strategies.

 

The two most important concepts in building the LC Diversified portfolio were diversification and risk management, which we believe are concepts that are both timeless and universal to any market regime. But don't just take our word for it:

 

“This extraordinary achievement quite naturally attracts all the attention, yet close observers can say that the real secret to Yale’s remarkable success is defense, defense, defense. But how, you might ask, can defense be so important to Yale’s remarkably positive results? Starting with that great truism of long-term success in investing - if investors could just eliminate their larger losses, the good results would take care of themselves - we remind ourselves of the great advantages of staying out of trouble.”

 

“The most powerful tool an investor has working for him or her is diversification. True diversification allows you to build portfolios with higher returns for the same risk.  Most investors… are far less diversified than they should be.  They’re way over-committed to stocks…”

-Jack Meyer, manager of Harvard University’s multi-billion dollar endowment fund, produced 15.9% per year for fifteen years (a 910% compounded return).

 

If you’d like to learn more about any or all of our strategies and services subscribe here or contact us for more information. We welcome an opportunity to discuss how we could potentially add value to your financial life. 

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