Is diversification dead?

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THE EVOLUTION OF FINANCIAL INTELLIGENCE
FUTURE WEALTH
09
WORTH.COM
VOLUME 19 | ISSUE 06

2. '( , Leading Wealth Advisor
)/ (- #1(.$-.
Jason M. Laurie, CFA®, CFP®, Director
Is diversification dead?
By Jason M. Laurie
Almost overnight, diversification—the the popular view that all higher-risk OUR TEAM OF OWNERS
universally accepted tenet of any assets had negative returns over the
sound investment strategy—became a past decade is a myth. The SP 500 Altair and its principals are consis-
dirty word. Because of the financial may have lost value, but many diversi- tently recognized as top independent
crisis, many investors now question fied portfolios, even those with only wealth managers by Worth, Barron's,
whether it provides any benefit. The higher-risk assets (no bonds), were Financial Advisor, Wealth Manager and
fourth quarter of 2008 provides dra- positive. Chicago magazines. Steven B. Weinstein
matic support to that viewpoint; all A dollar invested in a broad mix of has been selected by Barron's for four
higher-risk assets—stocks, real estate both U.S. and international stocks, consecutive years as one of the top 100
and commodities—tumbled together, real estate and commodities would independent financial advisers and was
losing 20 to 40 percent in one quarter. have annualized approximately 2.4 per- named to Worth’s roster of the top
Diversification seemed like an umbrella cent, or increased to $1.27. This ending wealth advisers seven times.1 Richard K.
in a hurricane. Admittedly, in fall 2008, value is 50 percent higher ($1.27 ver- Black has been named twice to Worth’s
diversification did not work as most sus 85 cents) than an investment only top wealth advisers.2
investors expected it would. in the SP 500. The primary reason Individual accolades are always a result of
In hindsight, investors should have for this outperformance is that some team efforts.
avoided stocks in favor of bonds over higher-risk assets, led by emerging
the past decade. The 10-year annual- market stocks, gained value. While Steven B. Weinstein, CFA®, CFP®, JD
ized return of the Barclays Capital the SP 500 is diversified in that it is President and Chief Investment Officer
Aggregate, a proxy for taxable bonds, comprised of 500 stocks, it is not diver- Richard K. Black, CFP®, JD
was 6.5 percent as of June 30, 2010. sified into other higher-risk assets. Managing Director
In other words, a U.S. dollar invested An annualized performance of 2.4 per- Bryan R. Malis, CFA®, CFP®
in taxable bonds would have been cent is disappointing versus historical Managing Director
Rebekah L. Kohmescher, CFP®, CPA
worth $1.88 at the end of that period— expectations of more than 8 percent,
Director
a cumulative return of 88 percent. but consider that a 10-year cumulative
Jason M. Laurie, CFA®, CFP®
Conversely, the 10-year annualized return of 27 percent is much better Director
return of the SP 500 was an abysmal than -15 percent. Michael J. Murray, CFA®, CFP®, CAIA®
-1.6 percent. A dollar invested on Diversification is not a panacea, Director
June 30, 2000, in the SP 500 was but it would be dangerous to discard Brett K. Rentmeester, CFA®, CAIA®
worth only 85 cents 10 years later—a it completely. Diversification did not Director
cumulative loss of 15 percent. fail; it was a failure to properly diver- Donald J. Sorota, CFP®, CPA
Despite the weak performance of sify that exacerbated the pain of the Director
domestic stocks over the last decade, last 10 years.
INDEX ANNUALIZED 10 YEAR (%)
(through June 30, 2010)
MSCI Emerging Markets 10.3
MSCI US REIT 9.7
DJ-UBS Commodities 4.4
Russell 2000 3.0
1
September 2001, January 2004 and October
MSCI EAFE 0.6
2004, 2005, 2006, 2007 and 2008
SP 500 Composite -1.6 2
October 2007 and 2008
Source: Financial Times Interactive Data (IDC)

4. How to reach Jason M. Laurie
Please call me at 312.429.3030 to set up an
initial appointment.
– Jason M. Laurie
ALTAIR ADVISERS LLC
Left to right: front row-Richard K. Black, Steven B. Weinstein, Bryan R. Malis; back row-Rebekah L. Kohmescher, Donald J. Sorota, Brett K. Rentmeester, Jason M. Laurie, Michael J. Murray
About Altair Advisers LLC
Altair was formed on June 1, 2002, by members of Arthur Andersen’s Chicago Investment Consulting Practice, with
an exclusive focus on providing independent investment counsel to high net worth individuals. The firm is
employee owned and committed to building long-term successful relationships by providing responsive
and highly personal service. Turmoil in the markets and upheaval in the adviser community have clients on
the move. According to the Capgemini 2009 World Wealth Report, “Of all the high net worth individual clients
surveyed, 27 percent said they withdrew assets or left their wealth management firm in 2008.” Altair has
retained more than 95 percent of its clients.
Assets Under Management Compensation Method
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Minimum Annual Fee Primary Custodian for Investor Assets / /$ /-$$/

5. Professional Services Provided
Minimum Net Worth Requirement ) ++(+ +# (+1$./*$+/ #1(.,-4 .$-1($.
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9. WORTH.COM DECEMBER-JANUARY 2011 095

10. W
Steven B. Weinstein, CFA®, CFP®, JD
President and Chief Investment Officer
Richard K. Black, CFP®, JD
Managing Director
Bryan R. Malis, CFA®, CFP®
Managing Director
Rebekah L. Kohmescher, CFP®, CPA
Director
Jason M. Laurie, CFA®, CFP®
Director
Michael J. Murray, CFA®, CFP®, CAIA®
Director
Brett K. Rentmeester, CFA®, CAIA®
Director
Donald J. Sorota, CFP®, CPA
Director
Altair Advisers LLC
303 West Madison Street
Suite 600
Chicago, IL 60606
Tel. 312.429.3000
Email: info@altairadvisers.com
www.altairadvisers.com
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THE EVOLUTION OF FINANCIAL INTELLIGENCE
About the Worth Leading Wealth Advisors
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methods of compensation and scope of current business. In order to be considered for the Worth Leading Wealth Advisors Program, financial professionals must be willing to provide complete
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