The document discusses concentrated investment portfolios and their potential benefits compared to more diversified portfolios. It argues that concentrated portfolios that are limited to well-researched companies meeting strict qualitative and quantitative guidelines can generate above-average returns with less risk. Data is presented showing that over 7- and 10-year periods, concentrated portfolios with 35 or fewer stocks outperformed larger portfolios with over 35 stocks, while also exhibiting lower risk as measured by standard deviation. The key benefit of a concentrated portfolio is that it allows for deeper research on fewer companies to fully understand their competitive advantages and assess the sustainability of their business models.
Steve Miller • Transamerica Financial Advisors
- Active management in plain English: An advisor's perspective by Greg Gann
- Spike in VIX briefly shatters market calm
- Making a 10-year succession plan work (John Gutfranski & Debra White Stephens, Cetera Advisor Networks LLC)
Emerging Managers: Small Firms with Big IdeasCallan
Everybody has to start somewhere, including investment managers. Even the largest firms with broad name recognition and substantial assets were once emerging firms.
Emerging managers generally include smaller and newer investment managers, potentially
with atypical ownership structures. While smaller asset pools can work against them in some cases, it can also work in their favor, enabling them to access opportunities that larger, more established investment managers cannot.
Many U.S. institutional investors have long track records of dedicated investments with emerging managers while others are just starting to examine the space.
Emerging manager programs are becoming more commonplace, particularly at public pension funds, as investors recognize the potential portfolio gains that can be achieved through investing with the diverse and entrepreneurial investment managers that make up the emerging manager space.
Callan has long recognized the value that diversity of professionals and firm size can bring to investment outcomes. Our founder Ed Callan was instrumental in launching Progress Investment Management more than two decades ago. In 2010, we launched Callan Connects to expand our universe of emerging manager and minority, women, and disabled owned firms.
In this interview, Uvan Tseng talks with Lauren Mathias, who oversees Callan Connects, about trends and issues in the emerging manager arena.
Insider's Guide to Raising Seed CapitalNnamdi Okike
How-To guide for entrepreneurs on raising seed capital investment rounds, with detailed information on topics such as capital sources (angels, accelerators, and venture firms) as well as valuation, terms, and due diligence. Written by an experienced venture capital investor and angel.
John McGonagle • EPI Advisors, LLC
- Understanding the relevance of risk-adjusted returns by Dave Walton
- Strongest jobs gain since 2012 surprises markets
- Building stronger visibility for an advisory firm (Rodger Sprouse, Titan Securities)
Steve Miller • Transamerica Financial Advisors
- Active management in plain English: An advisor's perspective by Greg Gann
- Spike in VIX briefly shatters market calm
- Making a 10-year succession plan work (John Gutfranski & Debra White Stephens, Cetera Advisor Networks LLC)
Emerging Managers: Small Firms with Big IdeasCallan
Everybody has to start somewhere, including investment managers. Even the largest firms with broad name recognition and substantial assets were once emerging firms.
Emerging managers generally include smaller and newer investment managers, potentially
with atypical ownership structures. While smaller asset pools can work against them in some cases, it can also work in their favor, enabling them to access opportunities that larger, more established investment managers cannot.
Many U.S. institutional investors have long track records of dedicated investments with emerging managers while others are just starting to examine the space.
Emerging manager programs are becoming more commonplace, particularly at public pension funds, as investors recognize the potential portfolio gains that can be achieved through investing with the diverse and entrepreneurial investment managers that make up the emerging manager space.
Callan has long recognized the value that diversity of professionals and firm size can bring to investment outcomes. Our founder Ed Callan was instrumental in launching Progress Investment Management more than two decades ago. In 2010, we launched Callan Connects to expand our universe of emerging manager and minority, women, and disabled owned firms.
In this interview, Uvan Tseng talks with Lauren Mathias, who oversees Callan Connects, about trends and issues in the emerging manager arena.
Insider's Guide to Raising Seed CapitalNnamdi Okike
How-To guide for entrepreneurs on raising seed capital investment rounds, with detailed information on topics such as capital sources (angels, accelerators, and venture firms) as well as valuation, terms, and due diligence. Written by an experienced venture capital investor and angel.
John McGonagle • EPI Advisors, LLC
- Understanding the relevance of risk-adjusted returns by Dave Walton
- Strongest jobs gain since 2012 surprises markets
- Building stronger visibility for an advisory firm (Rodger Sprouse, Titan Securities)
Internal and External Succession for Privately Held BusinessesVirg Cristobal, CFP®
Case Studies Discussion of Succession Planning Through the Process
Establishing Planning Priorities
Getting Money Out of Your Business
Choosing a Successor
How to Evaluate Business Transfer
Building Your Contingency
Minimizing the Impact of Taxes
You talked—and we listened! Last year, participants at the 2014 National Associate of Corporate Directors (NACD) Board Leadership Conference identified a list of the most uncomfortable topics for board directors. These key topics led to an article entitled Boardroom Black Holes and Taboos, an eye-opening collection of places that directors fear to tread. But is avoiding these topics really the best way to govern your board?
http://www.conferenceboard.ca/e-library/abstract.aspx?did=7075
The operating context for boards and the companies they serve is increasingly complex. Highly effective boards can't allow themselves to ignore difficult topics, or let the status quo get in the way of effective governance. Directors must also have the grace and discretion to address some topics in a way that will not risk poisoning the dynamic and discussions at the board table.
Join the article’s author Gary W. Patterson, as he summarizes the key findings and explores the areas where boards have the most difficulty. Gary explores the key black holes and taboos facing boards today, and provides suggestions for how directors can overcome some of the most challenging discussions. Attendees will receive tangible take-aways to help Chairs, Directors and senior executives that work with the board identify potential areas of concern, and how to best approach these areas so that your team is ready to tackle any issue, no matter how uncomfortable.
Webinar Highlights
In this 60 minute recorded webinar, Gary examines:
•The original 20 black holes and taboos suggested by NACD participants,
•Further analysis on the most prevalent issues,
•The need to prioritize and address common issues raised, and
•How this external process can support your boardroom desire for good governance impact and outcomes.
http://www.conferenceboard.ca/e-library/abstract.aspx?did=7075
About Gary
Gary W. Patterson, the FiscalDoctor®, helps find million-dollar blind spots: before they find you—to build sustainable profitable growth. He has worked with the Fortune 500 and methodically helped two companies reach the coveted INC 500 list. He was the global IT and supply chain re-engineering project head for HH Robertson (UK), selected a premiere site by JD Edwards. Gary is a Stanford MBA/KPMG Big 4 CPA; author of four books in the areas of business growth, strategy and risk; and recognized thought leader by “Financial Times” ExecSense presentations service.
The original article is also available to download at http://www.fiscaldoctor.com/?p=1678
WFG - Building Better Financial Futurespetervinhong
This business presentation provides an overview of what World Financial Group believes and it\'s mission to help people have better financial futures. It also explains why someone would want to take advantage of the WFG business opportunity.
Many technology ventures are focused on securing funds from venture capitalists (VCs). This lecture focuses on understanding the motivation of private venture capital firms and how it affects the structure of their term sheets and legal agreements. We explore common pitfalls in dealing with VCs, as well as success stories regarding VC investment.
#FIRMday Manchester 2016 - Korn Ferry hay Group: 'Top performers in today's w...Emma Mirrington
Top performers in today’s world; are they the same as yesterday’s? Companies and job roles are constantly changing and evolving, and the skills and behaviour required to succeed
have also changed. Who or what was right for a job a few years ago may not be what you need now. Lucy Beaumont, Korn Ferry Hay Group explores:
• Why recruiting for high performing employees could expand your recruitment pool, standardise your processes and increase your revenue
• Practical tips to identify what differentiates your high
performers in virtually any role.
Private equity investor Gareth Banks from Champ Ventures, solicitor Anthony Short from Blackwell Short Lawyers and JPAbusiness director James Price share their expertise on the topic: Partners in Your Business.
Data driven deal sourcing at the early-stageNnamdi Okike
Early-stage deal sourcing is being transformed by data analytics. This presentation discusses key structural changes in angel investing and venture capital, and why these changes enable data-driven deal sourcing for angels and venture investors. These changes include a proliferation of data sources on companies, and a proliferation of companies themselves. This presentation is valuable for angels, venture investors, and entrepreneurs.
Steve Redelsperger • Cadaret, Grant & Co., Inc.
- Risky business: How to create a better investor behavioral profile by Kellye Whitney
- October lives up to volatility reputation
- Creating tax-advantaged financial strategies (Gary Strawn, Transamerica Financial Advisors, Inc.)
Internal and External Succession for Privately Held BusinessesVirg Cristobal, CFP®
Case Studies Discussion of Succession Planning Through the Process
Establishing Planning Priorities
Getting Money Out of Your Business
Choosing a Successor
How to Evaluate Business Transfer
Building Your Contingency
Minimizing the Impact of Taxes
You talked—and we listened! Last year, participants at the 2014 National Associate of Corporate Directors (NACD) Board Leadership Conference identified a list of the most uncomfortable topics for board directors. These key topics led to an article entitled Boardroom Black Holes and Taboos, an eye-opening collection of places that directors fear to tread. But is avoiding these topics really the best way to govern your board?
http://www.conferenceboard.ca/e-library/abstract.aspx?did=7075
The operating context for boards and the companies they serve is increasingly complex. Highly effective boards can't allow themselves to ignore difficult topics, or let the status quo get in the way of effective governance. Directors must also have the grace and discretion to address some topics in a way that will not risk poisoning the dynamic and discussions at the board table.
Join the article’s author Gary W. Patterson, as he summarizes the key findings and explores the areas where boards have the most difficulty. Gary explores the key black holes and taboos facing boards today, and provides suggestions for how directors can overcome some of the most challenging discussions. Attendees will receive tangible take-aways to help Chairs, Directors and senior executives that work with the board identify potential areas of concern, and how to best approach these areas so that your team is ready to tackle any issue, no matter how uncomfortable.
Webinar Highlights
In this 60 minute recorded webinar, Gary examines:
•The original 20 black holes and taboos suggested by NACD participants,
•Further analysis on the most prevalent issues,
•The need to prioritize and address common issues raised, and
•How this external process can support your boardroom desire for good governance impact and outcomes.
http://www.conferenceboard.ca/e-library/abstract.aspx?did=7075
About Gary
Gary W. Patterson, the FiscalDoctor®, helps find million-dollar blind spots: before they find you—to build sustainable profitable growth. He has worked with the Fortune 500 and methodically helped two companies reach the coveted INC 500 list. He was the global IT and supply chain re-engineering project head for HH Robertson (UK), selected a premiere site by JD Edwards. Gary is a Stanford MBA/KPMG Big 4 CPA; author of four books in the areas of business growth, strategy and risk; and recognized thought leader by “Financial Times” ExecSense presentations service.
The original article is also available to download at http://www.fiscaldoctor.com/?p=1678
WFG - Building Better Financial Futurespetervinhong
This business presentation provides an overview of what World Financial Group believes and it\'s mission to help people have better financial futures. It also explains why someone would want to take advantage of the WFG business opportunity.
Many technology ventures are focused on securing funds from venture capitalists (VCs). This lecture focuses on understanding the motivation of private venture capital firms and how it affects the structure of their term sheets and legal agreements. We explore common pitfalls in dealing with VCs, as well as success stories regarding VC investment.
#FIRMday Manchester 2016 - Korn Ferry hay Group: 'Top performers in today's w...Emma Mirrington
Top performers in today’s world; are they the same as yesterday’s? Companies and job roles are constantly changing and evolving, and the skills and behaviour required to succeed
have also changed. Who or what was right for a job a few years ago may not be what you need now. Lucy Beaumont, Korn Ferry Hay Group explores:
• Why recruiting for high performing employees could expand your recruitment pool, standardise your processes and increase your revenue
• Practical tips to identify what differentiates your high
performers in virtually any role.
Private equity investor Gareth Banks from Champ Ventures, solicitor Anthony Short from Blackwell Short Lawyers and JPAbusiness director James Price share their expertise on the topic: Partners in Your Business.
Data driven deal sourcing at the early-stageNnamdi Okike
Early-stage deal sourcing is being transformed by data analytics. This presentation discusses key structural changes in angel investing and venture capital, and why these changes enable data-driven deal sourcing for angels and venture investors. These changes include a proliferation of data sources on companies, and a proliferation of companies themselves. This presentation is valuable for angels, venture investors, and entrepreneurs.
Steve Redelsperger • Cadaret, Grant & Co., Inc.
- Risky business: How to create a better investor behavioral profile by Kellye Whitney
- October lives up to volatility reputation
- Creating tax-advantaged financial strategies (Gary Strawn, Transamerica Financial Advisors, Inc.)
Private equity investing in 2016: Panacea or 'Hail Mary' Richard Silva
Private equity has become the panacea of choice for institutional investors to offset low public equity and fixed income returns, because of recent relative outperformance, illiquidity and long timeframes. It’s become another way for institutional investors to kick the can down the road. As a result, pension funds and endowments are relying more heavily on private equity allocations than ever before to make up for lost ground in other asset classes.
Building wealth and protecting legacies for families, businesses, and those most important to them.
To learn more please visit our website: http://mfg.nm.com/
CreativeCap Advisors is a marketing and investor relations consultancy with extensive knowledge and expertise on the investment management industry. The firm works extensively with newly launched funds to more established managers in helping to solidify their market position and attract new capital. The breadth of service offerings is a testament to the firm’s 360° approach to marketing and investor relations. It is complimented by a dedicated team who are focused on bringing their clients’ business to the next level. The firm takes a holistic approach to reviewing each business and generates a cohesive strategy tailored to each specific client. Through our affiliate networks around the world, the firm excels at elevating and positioning each fund in becoming the most attractive to varying types of capital. CreativeCap Advisors at the core is a business designed to assist and integrate with investment management firms by working alongside C-level executives who are seeking to further expand their business.
Contact For More Information: Tyra Jeffries, Founder + CEO | tyra.jeffries@creativecapadvisors.com
This is an abbreviated version of Carl Sheeler's Pulse blog on Linkedin, 'What is your risk vs. opportunity optics?' The purpose of this material on Optics and the presentation about the 'Business Owner Paradox are inter-related.
Ahead of the marcus evans Elite Summit 2017 and the Private Wealth Management Summit Fall 2017, Peter Craddock discusses what investors need to look for in selecting a venture fund, and the value of an LP co-investment option
Evaluating Your Investments Module 8 of Family Financial Freedom Floyd Saunders
The seminars are available to anyone including financial planners, and other professionals in the financial services industry who would like a set of the materials, participant's workbooks or the Family Financial Freedom book (discounts for volume purchases)You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at floyd.saunders@yahoo.com for a copy of the presentation or more information on how to get seminar materials.
An easy to understand guide to investing in securities like stocks, bonds and mutual funds for your financial future. This is material taken from chapter two of my book, "Figuring Out Wall Street".
Worth Article 35 - What are the Benefits of Concentrated Portfolios - April and May 2015
1. T H E S E A R C H F O R
I M M O R TA L I T Y
T E C H N O L O G I C A L A N D G E N E T I C E X P L O R A T I O N S T H A T
A R E R E V O L U T I O N I Z I N G H U M A N L O N G E V I T Y
W
MAKE
How Big Data Can Save
Your Life; The Race to
Driverless Cars; Can the
Trumps Make Wine?
GROW
Craig Venter on the
Future of Aging; Six Health
Investments; Tech Wealth
Investing in Longevity
LIVE
12 Steps to Living Better;
Six Spring Getaways; The
Best Cuban Cigars You Might
Soon Be Able to Smoke
T H E E V O L U T I O N O F F I N A N C I A L I N T E L L I G E N C E
®
V O L U M E 2 4 | E D I T I O N 0 2
35
W O R T H . C O M
2. Kayne Anderson Rudnick
Caleb “Spuds” Powell, CPWA®
, Managing Director; Randall Allen, Senior Vice President;
Darnel Bentz, Senior Vice President; Curt Biren, CPWA®
, AIF®
, Senior Vice President;
Thomas Connaghan, Senior Vice President; Dustin Gale, CFP®
, Senior Vice President;
Diane Spirandelli, CFA®
, Senior Vice President
Los Angeles—San Francisco, CA Leading Wealth Advisor
What are the benefits of
concentrated portfolios?
By Kayne Anderson Rudnick
1
eVestment is a provider of institutional investment data intelligence and analytic solutions. Universes considered include non-U.S. diversified equity, U.S.
large cap, U.S. mid cap, U.S. small-mid cap, U.S. small cap, U.S. all cap and U.S. micro cap.
Information expressed herein is strictly the opinion of Kayne Anderson Rudnick and is provided for discussion purposes only. This report should not be
considered a recommendation or solicitation to purchase securities. Past performance is no guarantee of future results.
I get more and more convinced that
the right method of investment is to
put fairly large sums into enterprises
which one thinks one knows some-
thing about and in the management
of which one thoroughly believes. It
is a mistake to think one limits one’s
risk by spreading too much between
enterprises about which one knows
little and has no reason for special
confidence. —John Maynard Keynes
A concentrated portfolio is a high-
conviction strategy that can play a
key role in a well-executed asset-allo-
cation strategy. A focused group of
well-researched companies, each with
a sustainable competitive advantage,
can provide superior protection
against a permanent loss of capital,
versus a portfolio with a higher num-
ber of holdings with a lower degree
of conviction.
eVestment data through December
showed that concentrated portfolios
(35 or fewer holdings) outperformed
larger, nonconcentrated portfolios
(over 35 holdings) in the prior seven-
and 10-year windows.1
Further, the
same eVestment data showed that
concentrated portfolios experienced
lower levels of risk (as measured by
standard deviation) than noncon-
centrated portfolios did during the
same time frames. Why? By focusing
on fewer companies, portfolio man-
agers can devote more resources to
obtaining a complete picture of those
companies’ competitive protections,
determining if they are sustainable
over time. This creates an appropri-
ate valuation for the business and
promotes educated decision-making
as to whether a business can sustain
its profitability over the next 10 to
15 years, not just the next one to two
earnings cycles.
A common fallacy is that concen-
trated portfolios are inherently more
risky. This misconception exists
because the relationship between
diversification and volatility has
been overstated for years, leading
investors to believe they can diver-
sify away risk only by including a
large number of stocks. Yet, after
a point, adding more stocks does
not reduce risk significantly. In fact,
numerous studies have shown that
a relatively small number of stocks
provides most of the diversification
an investor needs, with the benefit to
a one-stock portfolio being largely
captured within the first few additions.
Accordingly, the decision to add
more securities should be based
on the manager’s conviction, not
the need to diversify, as the latter
tends to water down returns. When
an “active” portfolio looks more like
the benchmark—a scenario referred
to as “over-diversification” or “clos-
eted indexing”—its likelihood of
outperformance decreases. The
larger number of different securities
within the portfolio often means their
equity positions are so small (0.2 per-
cent to 1 percent) that no individual
stock can affect portfolio returns—neg-
atively or positively—with any degree
of significance. The result is simply a
high number of average companies
generating only an average return.
Further, managers who over-diver-
sify typically define risk as track-
ing error (the difference between
the return an investor receives and
that of the benchmark he or she is
attempting to imitate), versus the
potential for permanent loss of capi-
tal, and they choose to buy the bench-
mark to avoid sticking out. However,
this behavior can be counter-produc-
tive because managers’ best ideas
have demonstrated a stronger likeli-
hood of outperforming over time.
We believe a concentrated portfo-
lio can only generate excess returns
if it is accompanied by a superior
research process capable of uncov-
ering quality companies with sus-
tainable long-term competitive
advantages and attractive valua-
tions. By limiting a portfolio to well-
researched companies that meet
strict qualitative and quantitative
guidelines, managers increase their
chances of capturing above-average
returns with less risk.
3. How to reach Kayne Anderson Rudnick
We are oriented toward quality—in our investments, in
our service and in our business practices. To learn more,
please contact us at 800.231.7414.
livegrowmake
Kayne Anderson Rudnick 1800 Avenue of the Stars, 2nd Floor, Los Angeles, CA 90067 800.231.7414
580 California Street, Suite 1750, San Francisco, CA 94104
KayneandersonrudnicK
Assets Under Management
$10 billion (as of 3/31/15)
Largest Client Net Worth
$500 million+
Minimum Fee for Initial Meeting
None required
Minimum Net Worth Requirement $1 million
Professional Services Provided
Investment advisory and money
management services
Compensation Method Asset-based fee (investment services)
Primary Custodian for Investor Assets Fidelity Investments
Financial Services Experience Powell, 21 years; Allen, 16 years;
Bentz, 13 years; Biren, 28 years; Connaghan, 18 years;
Gale, 10 years; Spirandelli, 43 years
Email spowell@kayne.com tconnaghan@kayne.com
rallen@kayne.com dgale@kayne.com
dbentz@kayne.com dspirandelli@kayne.com
cbiren@kayne.com
Website www.kayne.com
ILLUSTRATIoNByKEVINSPRoULS
“The decision to add more securities
should be based on the manager’s
conviction, not the need to diversify.”
—Kayne Anderson Rudnick
Front row: Diane Spirandelli,
Dustin Gale, Caleb “Spuds”
Powell; back row, left to right:
Thomas Connaghan,
Randall Allen, Darnel Bentz;
not pictured: Curt Biren
085w o r t h . c o m a p r i l - m ay 2 0 1 5
About Kayne Anderson Rudnick
Ranked among the Top 10 of Barron’s list of Top Independent Financial Advisors for the last two years,
Kayne Anderson Rudnick is a boutique investment advisory firm founded in 1984 to manage capital for
its founders, including John Anderson (a Forbes 400 billionaire and the benefactor of UCLA’s Anderson
School of Management). With offices in Los Angeles and San Francisco, the company manages assets for
both high net worth individuals and institutions. Its advisors boast an average client relationship length of 11
years and a retention rate of 98 percent, thanks to outstanding client service and personalized investment
strategies designed around clients’ unique circumstances and objectives. Disciplined risk management
and diversification are key components in helping clients achieve their goals. Accordingly, the company’s
comprehensive platform offers proprietary investment strategies and a range of carefully selected,
externally managed investment solutions. With 30 years of experience blending traditional and alternative
investments, Kayne Anderson Rudnick is known for a commitment to high-quality business practices,
investment strategies and wealth solutions.
4. the evolution of financial intelligence
R E P R I N T E D F R O M
®
Kayne Anderson Rudnick is featured in Worth®
2015 Leading Wealth Advisors™
, a special section in every edition of Worth®
magazine. All persons and firms appearing in this section have
completed questionnaires, have been vetted by an advisory group following submission by Worth®
, and thereafter paid the standard fees to Worth®
to be featured in this section. The information
contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy
or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®
, and Worth®
will not be responsible for the
performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future
performance. Worth®
, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particular
investments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth®
is a registered trademark of Sandow Media LLC.
See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.
Caleb “Spuds” Powell, CPWA®
Managing Director
Randall Allen
Senior Vice President
Darnel Bentz
Senior Vice President
Curt Biren, CPWA®, AIF®
Senior Vice President
Thomas Connaghan
Senior Vice President
Dustin Gale, CFP®
Senior Vice President
Diane Spirandelli, CFA®
Senior Vice President
Kayne Anderson Rudnick
1800 Avenue of the Stars, 2nd
Floor
Los Angeles, CA 90067
580 California Street, Suite 1750
San Francisco, CA 94104
Tel. 800.231.7414
spowell@kayne.com
rallen@kayne.com
dbentz@kayne.com
cbiren@kayne.com
tconnaghan@kayne.com
dgale@kayne.com
dspirandelli@kayne.com
www.kayne.com