According to David Lau, chief operating officer at Jefferson National, advisers have demonstrated a need for tools to build more resilient portfolios. “They recognize the importance of using tactical strategies to manage risk and add more ballast,” Lau said.
The partnership will allow Jefferson National to expand the selection of tactically managed portfolios on its tax-advantaged investing solution, according to Lau. “Advisers are able to add a proven tactical manager to a portfolio with the click of a button,” he said. “Employing tactical management within our flat-fee VA [variable annuity] will improve the inherent tax-inefficiencies of these high-turnover strategies and help enhance performance for clients.”
The company noted that a majority of advisers see tactical management and alternative investments as key to navigating the current market.
Tactically managed portfolios have high turnover, which can produce short-term capital gains, and the subsequent tax burden can erode performance. In fact, Morningstar estimates that over the 74-year period ending in 2010, investors who did not manage investments in a tax-sensitive manner gave up between 100 and 200 basis points of their annual returns to taxes. Jefferson National offers a solution to this problem by wrapping tactically managed models in tax deferred variable annuity. Research has shown that a low-cost tax-deferred vehicle can improve the performance potential of tactical strategies and other tax-inefficient investments —without increasing risk.
“In today’s volatile market, advisers would do well to emulate the strategies of Yale, Harvard and other leading institutional investors by adding the diverse, non-correlating return streams that tactical management can provide,” said Steve Blumenthal, founder and chief executive of CMG Capital Management Group. “Instead of the traditional 60/40 stock/bond allocation, adding a tactical approach to a portion of the portfolio can help increase diversification, add greater risk management and the potential to enhance returns in the long run. And to improve the tax-efficiency of tactical strategies, Jefferson National’s tax-advantaged investing solution has proven to be the right fit for our firm, with the industry's most investment options and flat-fee pricing.”
Models available to the RIAs and fee-based advisers working with Jefferson National include CMG System Research Treasury Bond Program, CMG Opportunistic All Asset Strategy and CMG Scotia Partners Growth S&P Plus Program.
These tactical strategies aim to provide what CMG refers to as “enhanced modern portfolio theory,” through the use of quantitative rules-based trading strategies, incorporating various technical, fundamental and mathematical indicators, with a clearly defined buy-and-sell discipline.
More information is at CMG Capital Management’s site.