For more information contact: emailus@marcusevans.com Robert Benson, Chief Investment Officer at Laird Norton Tyee and a speaker at the marcus evans Private Wealth Management Summit Spring 2012 puts the spotlight on the risks of relying on mean-variance optimization. Join the 2014 Private Wealth Management Summit along with leading regional investors in an intimate environment for a highly focused discussion on the latest investment strategies in the market. For more information contact: emailus@marcusevans.com

1. The Pitfalls of
Mean-Variance Optimization
catastrophic events have a low losses than to gains of an equal
probability of occurring, they can cause magnitude.
significant harm to a portfolio. In
today’s global economy, there is a lot of Investors must utilize additional
inter-correlation between what happens metrics, such as the Conditional Value
in Greece and the S&P 500 in the US, at Risk metric which focuses on
for example. Additionally, these events downside risk and takes it into account
have always been more frequent than clients’ asymmetric appreciation of
investors anticipate, when they assume returns and variance around returns.
a normal distribution of investment
returns.
Generally, investors find it easy to
Interview with: Robert Benson,
Chief Investment Officer, Laird
utilize the standard mean-variance
optimization process, which assumes We must find a
Norton Tyee that the correlations between assets are
stable over time. Correlations are very
dynamic, however, when we encounter
different way
The mean-variance theory that focuses
on standard deviation is good most of
Black Swans. At these times, mean-
variance optimization fails to accurately
of approaching
the time, but does not tell the whole
story, according to Robert Benson, Chief
model performance.
portfolio
Investment Officer at Laird Norton Tyee.
When we experience events such as
What changes in investment
strategy does this call for? construction
that of 2008, mean-variance
optimization falls apart because the We must find a different way of
assumptions no longer hold water, approaching portfolio construction, one
negatively impacting the performance of that anticipates a largely normal What else should family offices
an investment portfolio, he adds. distribution of returns over most time focus on?
periods but also factors in the
A speaker at the marcus evans observation that Fat-Tail events happen Many investment advisors just look at
Private Wealth Management more frequently than normally the assets, as that is what they are
Summit Spring 2012, in Amelia distributed returns suggest. hired to do. I strongly believe that a
Island, Florida, June 3-5, Benson talks more holistic approach is necessary. We
about mean-variance optimization and The first step is to deemphasize our guide the children and grandchildren of
why it does not provide a complete reliance on these traditional metrics. wealthy families on how to be successful
representation of markets. Standard deviation is simple enough for caretakers of multigenerational wealth.
private wealth managers to We have seen many instances of
What is the downside of investing communicate to clients when analyzing individuals generating wealth and
within a mean-variance framework? assets, but it does not fully measure subsequent generations spending it.
what clients want. Standard deviation
Mean-variance optimization is good assumes that investors are equally Building and maintaining wealth require
most of the time, but does not tell the happy/disappointed by equally sized different skill–sets and if they are not
whole story. In 2008 we saw that there gains/losses. History has shown us that taught how to be financially responsible,
is always the risk of Fat-Tail or Black this is not the case. Investors have their family’s wealth may not last
Swan events. Although these potentially much stronger emotional reactions to beyond the second generation.

2. About the Private Wealth Management Summit Spring 2012
The Investment Network –
marcus evans Summits group
This unique forum will take place at The Ritz Carlton, Amelia Island, Florida, June
delivers peer-to-peer information
3-5, 2012. Offering much more than any conference, exhibition or trade show, this
on strategic matters, professional
exclusive meeting will bring together esteemed industry thought leaders and
trends and breakthrough
solution providers to a highly focused and interactive networking event. The
innovations.
Summit includes presentations on unconventional investment strategies, Federal
Tax Policy challenges, risk management strategies and the family office governance
structure.
www.privatewealthsummit.com
Please note that the Summit is a
closed business event and the
Contact
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