The Markets June 5, 2012

Neuberger Berman Offers Mixed Outlook for Global Markets

At a presentation about global investing in volatile times, Neuberger Berman portfolio managers offered insights about big pension plans, industry trends and markets around the world.
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The news was both good—credit quality profiles have improved, said Joseph Amato, president and chief investment officer—and bad—“Volatility is here to stay,” said Sandy Pomeroy, managing director and portfolio manager for the MLG group.

Amato said the improving trend is showing itself in U.S. mutual fund assets and a high-yield market, currently about 8.5%, which is making markets more attractive. It’s possible that we will see yields of 8% or more in 2012, he predicted.

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Companies have refinanced substantial portions of their balance sheets, Amato noted, and outflows in high-yield markets are still good.

But, he warned, “We’re in a low-returns environment,” and noted that big pension plans require especially careful scrutiny and a long-term outlook for the investment strategy. “You have to be careful not to whipsaw it whether you’re dealing with public or corporate plans: it could be hugely underfunded.“

As Europe’s trouble has deepened—the euro zone “is clearly unsustainable on its current course,” said Benjamin Segal, managing director and portfolio manager—the firm has turned increasingly to emerging markets, finding Latin America particularly attractive, and companies that are servicing the developed world. “Economic growth is going to be harder to come by in Europe,” Segal said. “We’ve all had to become macro economists in a hurry.”

While most people are concerned about what markets are most volatile, Amato said, “We don’t have a S.W.A.T. team going around trying to come up with the definitive implications of what’s going on in Europe.”

Institutional inflows continue to remain strong, said Thomas O’Reilly, managing director and co-portfolio manager for high-yield and blended-credit portfolios. He forecast a year of good returns, but Pomeroy said volatility is an issue that will face investors for the foreseeable future while they reach for places to find returns.

“It’s difficult to be a long-term investor,” admitted Peter von Lehe, managing director of the company’s alternative investments.

Products June 5, 2012

Organization Launches Custom QDIA Association

The Center for Due Diligence (CFDD) created a qualified default investment alternatives (QDIAs) association to help advisers assess and understand target-date funds (TDFs).
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To fill what it says is a void, meet needs and develop solutions, the CFDD, an independent organization, is launching the Custom QDIA Association, “one of the few major opportunities available to the very mature retirement plans industry,” said Phil Chiricotti, the CFDD’s president. The QDIA Association will identify and evaluate TDF resources, analytic tools, potential alliance partners and the custom flexibility from recordkeepers.

Combined assets of asset-allocation solutions held in all investment vehicles have grown to more than $1 trillion in a short period, and that growth is expected to continue, the Center said in a release.

Target-date funds are consolidating defined contribution (DC) plan assets, becoming the dominant investment category. Asset-allocation services are destined to play a major role in the nation’s retirement system, but due diligence is seriously lacking. While TDFs are complicated, evaluation standards have not developed in tandem with the rise in popularity of these funds.

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Plan sponsors  and participants are looking for guidance, but the industry has not identified or managed risk effectively. Advisers and consultants can also make recommendations that are at odds with their client’s draw-down tolerance, the CFDD warned.

The missions of the Custom QDIA Association are to:  

  • Enhance TDF analytic skills;
  • Develop standards to evaluate TDFs; 
  • Identify and evaluate solutions;
  • Develop standards for evaluating solutions;
  • Determine whether custom solutions are needed;
  • Identify and evaluate custom solutions and appropriate service partners; and
  • Facilitate design and implementation of custom solutions.

Member benefits include the website, data feeds, TDF screens, performance reporting, enhanced CIT reporting and custom solutions workshops.

Other benefits are industry discussion, newsletter, research by the CFDD, member white papers, webinars, regional meetings and regulatory representation.

Membership is open to individual advisers and consultants as well as firms. Individual adviser members will be provided with two complimentary plan sponsor memberships.

Firm level membership is available to plan sponsors, registered independent advisers, broker/dealers, recordkeepers, third-party administrators, trading platforms, investment managers, glide path managers and other vendors.

The first-year membership fee will be waived for individual advisers who attend the organization’s adviser conference in October and to exhibitors.

More information on membership and the organization’s conference is available here.

 

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