Journal of Wealth Management

Emerging Topics in Family Offices

2023-09-21T16:14:08-07:00

The family office community, like the rest of the world, is facing challenges. The era of low interest rates and ample liquidity is coming to an end.[1] There is a persistent threat of recession and global instability from, among other things, the global pandemic and the war in Ukraine.[2] At the same time, the next generation of dynastic wealth is growing ever closer to taking over, with such succession creating additional challenges for family offices.[3]

Sustaining Relational Capital

2023-04-06T20:50:34-07:00

Relational attachment theory is among the most extensively researched psychological theories, and offers numerous applications for financial advising and wealth management practices. Attachment theory is one of the most comprehensive psychological frameworks for understanding how individuals can develop and use their relational (e.g., trust, bonding, closeness) and emotion-management (e.g., attunement, affective regulation, empathy) capacities. In addition, this scholarship elucidates how compromised attachment styles contribute to complications related to these capacities. This contribution provides review of attachment theory basics and a summary of empirical investigations into human socio-emotional patterns. In addition, this work reviews applications of attachment theories and research to financial management processes, relational dynamics related to wealth and money, impact of attachment styles on founders’ financial succession choices, and the impact of wealth on the rising generation.

CAN A CONVERTIBLE BOND INDEX RISK-ADJUSTED RETURN CHARACTERISTICS BE REPLICATED?

2023-01-26T14:51:44-08:00

Convertible bonds are fixed-income securities that have embedded options to convert into equities. This optionality offers investors a better risk-adjusted returns than traditional bonds or equities. However, due to limited liquidity, investing in convertible bonds is challenging for many investors. In this study, the authors propose a convertible bond index replication strategy using stocks and a high yield ETF. Their back-test shows that a replication portfolio consisting of stocks and a high yield ETF reasonably tracks the risk-adjusted return characteristics of a convertible bond index.

The Tom Brady G.OA.T. Effect and its Impact on the Super Bowl Stock Market Predictor

2023-06-05T10:14:29-07:00

Since its inception in 1967, the National Football League’s (NFL’s) Super Bowl has been popular, controversial, and extensively researched. One line of research has studied the surprising correlation between the league affiliation of the Super Bowl winner and stock market performance, referred to as the Super Bowl Stock Market Predictor (SBSMP). Changes in the Standard & Poor’s 500 index (SP500) are examined across the entire history to date and the recent 22 seasons, when Tom Brady was the predominant NFL quarterback. Holding period returns, terminal portfolio values, and risk metrics are provided. Overall, an investment policy of buying the S&P 500 in years when the NFC wins and investing in Treasury issues in AFC years, beats a buy-and-hold strategy. Both of these strategies outperform the practice of going long in the SP500 in NFC years and shorting the SP500 in AFC years. Tom Brady appears to be a confounding factor to the overall SBSMP, reversing it polarity. Though correlated, no causation for the correlation has been found or presented here. Hence, the SBSMP should be used with great caution and enjoyed as an interesting culmination of the NFL season.

A “Plug-and-Play” Goal-Based Dynamic Asset Allocation Model with Genetic Algorithms

2023-03-15T18:21:48-07:00

This work aims to reconcile theory and practice, proposing a dynamic model of asset allocation that allows the creation, with the help of genetic algorithms, of reasonable portfolios for investors chasing a variety of objectives over multiple time horizons.

Our results are interesting and confirm the efficiency of the model due to its good convergence towards the space of the best solutions in a limited computation time. The methodology may be applied: i) in the field of wealth management to define approaches useful for investors whose wealth must be invested in order to offset future liabilities; and ii) in the field of pension funds to define in a personalized way - based on individual pension needs - the investment dynamics useful for meeting retirement needs.

MARKET TIMING, SELECTIVITY, AND PERFORMANCE OF REAL ESTATE MUTUAL FUNDS

2023-04-11T09:08:33-07:00

This paper compares the performance of real estate mutual funds to that of the Russell 3000, FTSE All World Ex. U.S., and Dow Jones Real Estate benchmark (DJUSR) indexes over a 23-year period, from January 2000 to August 2022. We also divide the sample to account for the pre- and post-economic crisis periods to assess the risk-adjusted performance of real estate mutual funds (REMFs). In terms of absolute and risk-adjusted monthly returns, REMFs outperformed both US and global equities during the study period, and yet underperformed the US real estate benchmark index. During the period January 2000 to July 2007, REMFs outperformed the U.S. real estate benchmark index (Dow Jones U.S. Real Estate Index) on average. We find some evidence of successful market timing abilities by REMF portfolio managers especially during booming housing market period, but poor security selection abilities.