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Eat Your Own Cooking? Pros and Cons of Investing With Clients
I’ve always been a proponent of investing in the same portfolios as clients. This demonstrates the high degree of conviction that is necessary to maintain the twin disciplines of monitoring and adjusting holdings based on current economic conditions. There are, however, some logical arguments against this mentality. An advisor who invests in the same investment portfolio as his clients is in essence double dipping, since his success at the firm level will be perfectly correlated to his personal holdings.
I think the advantages of investing in one’s home-grown portfolio far exceed the risks, but I’m curious to see how other RIAs feel about this issue. Please let us know!
Use the comment field below to respond to Ben Warwick. Do you invest in the same portfolios your clients do?
About the Author
Ben Warwick, Quantitative Equity Strategies
Veteran investment strategist Ben Warwick brings 20 years of investment management expertise to AdvisorOne.com in his blog, Searching for Alpha. His market and economic insights provide readers with an insider’s view on generating alpha through asset allocation, the use of strategic portfolio “tilts” and alternative investments.
Ben Warwick founded Quantitative Equity Strategies (QES) in 2002 as a platform for implementing his quantitative investment strategies. The firm manages assets with traditional long-only equity and fixed income, private equity, managed futures and alternative investment mandates. QES has developed an industry leading expertise in building investment programs that can replicate alternative returns, while offering daily liquidity and transparency. These products include the HFRq, a hedge fund replication strategy developed in concert with Hedge Fund Research in Chicago; the Managed Futures Beta Index, with Aspen Partners; and the Nomura QES Modeled Private Equity Returns Index (PERI), which was developed with Nomura Bank and Preqin, the leading source of information in the private equity industry.
He is the author of several books, including "Searching for Alpha: The Quest for Exceptional Investment Performance," (Wiley, 2000) and "The Handbook of Managed Futures," with Carl Peters, (McGraw-Hill, 1996). He can be reached at ben@qesinvest.com.
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