The Markets January 14, 2007

International Equity Managers Post 2 Years of Above Index Returns

The majority of active international equity investment managers posted their second consecutive calendar year of above index returns despite the MSCI EAFE benchmark index soaring 26.3%, according to a new report.
Reported by
An InterSec Research news release said that the active managers’ outperformance, gross of fees at a median level, was narrow with a return of 26.6%. The company said the data is based on preliminary results from InterSec Research’s peer group performance universe of more than 135 unique institutional international equity products.

Meanwhile, in 2006, EAFE Value managers continued to outperform EAFE Growth managers, largely from relative outperformance in the Japan stock market. Japanese equities provided a drag for most managers as it was the only international developed country stock market in 2006 to not post a double-digit return. Currency, on the other hand, provided a strong boost for managers across the board.

The trailing three-year time frame also shows the majority of managers besting the benchmark index with a return of 20.7% versus 19.9% for MSCI EAFE with a range of active portfolios from 17.7% to 25.5%, according to InterSec.

According to the report, active managers of emerging markets portfolios delivered strong absolute returns but struggled when it came to matching the benchmark index performance. The preliminary results of the median manager in the InterSec Research peer group of institutional emerging markets equity products returned 31.3% for 2006 compared to the MSCI EM index return of 32.2%.

The three-year median return of the peer group, on a preliminary basis, is 31.3% versus 30.5% for the MSCI EM benchmark index. The majority of investment managers in the InterSec GEM peer group performance universe have outperformed in every three-year calendar period since InterSec began tracking their performance in 1996, according to the announcement.
In Practice January 11, 2007

Schwab Gives Start-up Advisory Firms More Help

Schwab Institutional is expanding its offering to help financial advisers leaving traditional financial companies to go it alone.
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According to a press release, the new offer by Schwab includes expanded partnerships with a national insurance broker and major commercial real estate firm, a lending program pilot, and expanded service teams. The company is also launching a Web site (http://www.backingtheindependent.com) and advertising campaign to help educate advisers about the benefits of opening an independent practice.

 

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Advisers will be able to look to real estate services firm CB Richard Ellis for transaction and project management support and for help on negotiating real estate costs for their firm. Schwab has also arranged for discounts on select office services like postage and shipping and executive suite options for small firms and/or for temporary use during a transition.

 

 

All advisory firms who custody assets with Schwab Institutional will receive from Marsh Affinity Services Group personalized service and preferred pricing on errors & omissions (E&O) insurance – an benefit normally only offered to firms with more than $100 million in assets.

 

 

Still in the fledgling stages, Schwab has launched a pilot program – Schwab Advisor Business Loan – in 11 states that offers start-up financing to advisers with at least $75 million in assets under management. Loan amounts will be based on an evaluation of each advisor’s creditworthiness and will begin at $100,000.

 

 

The company has also expanded the capabilities of its service teams to help advisers make a smooth transition, offering each advisory firm one conversion consultant to help ensure that all the necessary paperwork and transition details have been completed, including monitoring the account set-up and transfer process for advisors’ clients.

 

 

“The moves we are making today are the first of many we will make in 2007 to help advisors who want to become independent,” said Barnaby Grist, managing director of strategic business development for Schwab Institutional, in the release.

 

 

 

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