By: Guest Author Thuy Tran, KYUR Chief Investment Officer www.KYUR.co
The end of the year is typically marked by New Year’s resolutions and goals related to health, family and career. It is equally as important to assess whether 2024 financial goals were met and setting those for 2025 and beyond. Partnering with a Registered Investment Advisor (RIA) can be invaluable in helping you achieve your financial goals. Importantly, RIA’s have a fiduciary duty to act in the best interests of their client.
KYUR expects secular long-term technological, demographic and competitive trends to continue to make investing in equities an attractive long-term investment. However, post the presidential election and with the new incoming administration, KYUR anticipates increased market volatility. Factors that make it all the more important to work with an RIA who has significant experience in managing portfolios through different market cycles.
We believe there are 7 Ps when evaluating an RIA and the questions that should be considered.
1. Portfolio Management Experience
How many full stock market cycles has the RIA managed through?
Investment experience over a full stock market cycle, particularly in Portfolio Management, is an important consideration when choosing an RIA. An RIA needs to have the investment experience to effectively construct and manage your entire portfolio through different cycles to help reach your investment goals. This investment experience includes the number of years that they have been in portfolio management, types of assets classes they’ve managed and under what types of market conditions their portfolios have performed.
At KYUR, we consider a full stock market cycle to be 5 years. In addition to PhDs and MBAs in finance, the KYUR investment team has an average of over 20 years of direct investment experience in equities, fixed income, foreign exchange and commodities. These include the EU ERM Crisis (1992), Asian Contagion (1997), Long Term Capital Management Crisis (LTCM, 1998), the Euro currency implementation (2000) and the dot-com bust (2002). Thuy has invested in global equity markets across all market caps and has direct experience managing Global, European, Emerging Markets, Asia Pacific and Small Cap, both traditional and hedge fund strategies. He has managed portfolios through the Great Financial Crisis (2008), Global Quantitative Easing (2008-2014), China debt concerns (2015), Global Pandemic (2020) and Fed Quantitative tightening (2022), just to name a few.
2. Perspective
What type of investment perspective does the RIA have?
With portfolio management experience comes perspective. As the chart below shows, over the long-term, the S&P 500 has returned 10% on average since 1950. However, no two full market cycles are the same and there have been several significant peaks and valleys during this time. The key is having the experience in managing portfolios through these different cycles and the perspective as to what is driving that particular stock market cycle and how to best position a portfolio.
At KYUR, the investment team not only manages traditional strategies that benefit when stock markets rise but also hedge fund strategies that benefit from market declines. These experiences have provided the team with the perspective on how to navigate market volatility and generate alpha in rising and falling markets.
3. Performance
Has the RIA outperformed or underperformed versus the index over a full market cycle?
Portfolio Management experience combined with Perspective will help the RIA manage your assets more effectively over a full market cycle. Typically, a fee-only RIA will charge a management fee to manage your assets. An objective way to evaluate whether the RIA has “earned” their fee is comparing their annualized investment performance vs a standard benchmark such as the S&P 500 (SPX). It is difficult to outperform the SPX every year. However, assessing their annualized investment performance over a full market cycle (5 years) is an objective way to evaluate a RIA’s investment performance.
At KYUR, its flagship equity strategy has returned +18% (net of fees)* vs +15% for the S&P on a 5-year annualized basis, over a full market cycle (2019-2024).
*Past performance does not guarantee future results
4. Pricing
What is the fee that the RIA charges to manage your assets? Does the RIA pick the individual securities, or do they allocate between different actively managed funds (i.e. mutual funds)? Do they receive a commission if they recommend a product to you?
Over time, management fees will detract from returns. Particularly if the RIA allocates between actively managed external funds, such as a mutual fund, rather than choosing individual securities. The investor is effectively paying 2 management fees. One to the RIA making the allocation decision and one to the external fund to which the RIA allocates.
At KYUR, the investment team chooses all of the individual single securities, including alternative strategies. We do not allocate to externals managers of actively managed funds. By selecting the individual securities, this not only creates a better opportunity for outperformance, but the team also intimately knows all the underlying investments and can better react to reposition portfolios when market conditions warrant. KYUR charges one flat management fee as a percentage of assets.
KYUR is an independent firm and is not affiliated with any large brokerage firm and as such, does not earn commissions from recommending the brokerage’s products.
5. Process
What is the RIA’s investment Process and philosophy? What is their risk management process?
It is important that the RIA can explain their investment strategy and that it suits your risk tolerance and financial goals. For example, they may invest in small cap stocks, and you may prefer a diversified portfolio of large cap stocks that are more liquid and less volatile. They may be a value investor, but you prefer growth stocks.
KYUR implements a quantitative-based investment strategy with a preference toward large cap and liquid stocks. We believe in long-term investing, focusing on strategies that can grow your wealth steadily over 5, 10 and 15 years.
It’s important to understand your RIA’s risk management process. At KYUR, the investment process begins with risk management with the belief that the key to optimal investment return is to control the risks of capital losses. KYUR implements a proactive risk management strategy to help preserve capital and limit mark-to-market losses, effectively increasing long-term returns by minimizing the catch-up periods in recoveries following market dips.
Having a clear conversation about investment philosophy can ensure your advisor’s approach resonates with your personal financial goals.
6. Product Offering
What strategies and tools does the RIA offer to help manage market volatility?
With increased volatility, it is important that the RIA offers different tools to manage increased investment risk in rising and falling markets. KYUR offers a Total Wealth Solution comprised of traditional equity, fixed income and alternative asset strategies, all internally managed by KYUR that can be customized to meet clients’ investment goals and risk tolerance.
For accredited investors, KYUR offers hedge fund strategies. Prior to KYUR, Thuy managed strategies at Man GLG, one of the largest hedge fund managers in the world.
7. Protection, Transparency, Liquidity and Access
Where are my assets held? How liquid is the account if I need to withdraw funds in a timely manner?
Can I see my portfolio on a daily basis? How accessible is the RIA?
As the recent FTX collapse illustrates, an investor needs to consider where their assets are safeguarded and the level of portfolio transparency and liquidity. An RIA should be using a well-established custodian who holds your assets under your name and handles all administrative tasks. In addition, an RIA should be able to allow you to withdraw funds as needed and provide daily visibility into your portfolio.
KYUR does not hold clients’ assets. KYUR uses an SIPC insured third-party custodian who holds all client assets. All trade execution and preparation of statements are done by the custodian. The client has full control over their separately managed account (SMA). On a daily basis, KYUR’s clients have full transparency into all of their portfolio holdings, market values, performance and trades. Clients’ assets are not subject to a lock-up period and can be withdrawn in a timely manner.
At KYUR, all clients work directly with the portfolio managers managing their accounts to make sure their investment goals are met and any concerns are addressed.
Conclusion:
The most recent full market cycle (2019-2024) generated cumulative positive returns but was marked by significant volatility. Similarly, we are optimistic that there are secular drivers in place so that the next full market cycle will generate cumulative positive returns, but it won’t be a straight line. This makes it all the more important to partner with an RIA who has the 7 Ps to help navigate the ever-changing investing landscape.
KYUR, Inc. (www.KYUR.com) is an independent Registered Investment Advisor (RIA) located in Newport Beach in the heart of Fashion Island’s business district. KYUR’s mission is Building Financial Legacies. KYUR provides institutional quality investment services for individuals, accredited investors and foundations. On a 5-year annualized basis, KYUR’s flagship equity strategy has returned +18% vs +15% for the S&P. KYUR invests in equities, fixed income, foreign exchange, commodities and alternative assets such as crypto.
Thuy Tran is KYUR’s Chief Investment Officer. He graduated with an MBA from the Wharton School of Business at the University of Pennsylvania. He was chosen by Wharton Finance professors to be a Wharton Fund Fellow to manage a portion of the UPenn endowment. Prior to KYUR, Thuy managed global equity portfolios in traditional and hedge fund strategies for institutional clients at global investment firms such as Neuberger Berman (NYC) and Man GLG (UK). Funds he has managed have received awards from Morningstar, Lipper and Pensions & Investments.
Thuy provides a complimentary consultation to discuss your investment goals and a review of your current investments. Please email him at Thuy.Tran@KYUR.co to set up a meeting.
To learn more about this topic, check out another article on 6 Things Not to Do
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