Products March 26, 2008

Morningstar Portfolio Management Services Available on Schwab Platform

Schwab Institutional and Morningstar Investment Services have established a relationship whereby Morningstar’s portfolio management services will be available on Schwab Institutional's enhanced managed account services platform.
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Offered exclusively through financial advisers by Morningstar Investment Services, Morningstar’s managed portfolios include a series of mutual fund, ETF, and stock portfolios tailored to meet a range of investment strategies, time horizons, and risk levels, according to a press release.

The offerings include:

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  • Morningstar Managed Mutual Fund Portfolios which offer mutual fund strategies designed to meet a wide array of needs. Every portfolio is actively managed, applying a strategic asset allocation and proprietary mutual fund evaluation system grounded in Morningstar, Inc.’s independent fund and stock research. The full range of portfolios allows advisers to align client goals with specific strategies including those focused on long-term growth of capital, retirement income, absolute return, and global opportunities.
  • Morningstar Managed ETF Portfolios which are actively managed using a “core and explore” investment process. This strategy combines “core” positions that provide exposure to broad asset classes in an efficient and low-cost manner with “explore” positions that seek to add value by taking advantage of opportunities in the markets. Selection of explore positions are based on a proprietary ETF-evaluation system developed by Morningstar Investment Services that combines macroeconomic and fundamental factors (See Morningstar Announces Active ETFs in Managed Account).
  • Morningstar Managed Portfolios Select Stock Baskets which combine the independent stock research provided by Morningstar, Inc. with the portfolio management expertise of Morningstar Investment Services. The resulting stock basket is a customized portfolio of U.S.-traded stocks that is tailored to suit an investor’s specific parameters, including sector and industry exposure, stock restrictions, existing holdings, and personal tax situation.

“We’re pleased to offer our objective research, analysis, and portfolio management expertise so investment advisors who work with Schwab Institutional can focus on building relationships with their clients while we manage the portfolios,” said Kunal Kapoor, president and chief investment officer for Morningstar Investment Services.

Data & Research March 26, 2008

Nice Guise

They say that nice guys finish last, but a new study suggests a different conclusion.
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Common game theory has held that punishment makes two equals cooperate – that, in effect, people can pressured to do better by fear. However, a recent study by Harvard University researchers of some 104 Boston-area college students came to a different conclusion.
In the experiment, participants were paired up on a special version of a computer game called “prisoner’s dilemma.’ Normally, the game gives two players two options: either cooperate with their partner, or “defect’ (basically by choosing to take money from the other player). The outcomes vary depending on the choice each player makes. If both cooperate, each ends up winning a dime. If both defect, each gets nothing. However, if one cooperates and the other defects, the cooperative player loses 20 cents and the defector wins 30 cents.
Punisher Err?
The Harvard study, results of which were published in the journal Nature, added a third component to the game – an option to “punish’ someone who didn’t cooperate. It cost the punisher a dime to inflict a loss of 40 cents on their partner. And, according to the study, it was the players who chose to inflict punishment (the “evil’ option) who lost out consistently in the more than 8,000 contests monitored. A result that was widely trumpeted as indicating that “nice guys’ finish first.
In truth, while punishers fared poorly, it wasn’t necessarily the nice guys – the cooperators – who always finished first. Another strategy that fared well was an approach of defecting in response to a prior round defection by your partner.
In fact, this result led David Rand, a Harvard biology graduate student researcher who worked on the project to suggest that in the workplace what this means is that if a member of a project team isn’t pulling their weight, the best solution may not be to berate them, or even to coddle them into doing their part – but to simply find someone else who will contribute to the project.
It may also be worth noting that the study only looked at games between equals. Apparently punishment does seem to have a place in games when one player is dominant – and needs to enforce submission.

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