Q3 2020 Investment Perspectives

October 8, 2020

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The summary below has been created by a professional transcription vendor upon review of the recorded presentation. Please excuse any typos as well as portions noted to be inaudible.

Hello everyone. I’m George Padula, Chief Investment Officer of Modera Wealth Management. I’d like to thank you for tuning into our video today. We’re providing this video in conjunction with your quarterly report to provide some visualization around current market conditions and how we think about portfolio construction diversification in allocation during this time period. So I’m going to show you some slides regarding a current market performance and also some visualizations, and then wrap up with some context of how we think about portfolio construction. So let me share my screen with you. Okay.

And as we think about kind of index returns for the last quarter, if you look at the far left, uh, you will see,  the emerging market’s returns,  about 10% and us large cap, uh, equities, just about 9% us, small cap around 5%. And the same over here for international large cap, uh, equities REITs real estate. We’re just under three, your bond indexes here just under and around 1% and then high yield bonds here at 4.6%. So, as I was putting this together, I was thinking about kind of the structure or the shape of this. And I thought back to a talk I heard in January at the TEDx nation TEDx Natick event, and it was a talk by a guy by the name of a Don Inberg. He is the director and founder of the Wyss Institute. And the Wyss Institute does a really just amazing research,  multi gender multidisciplinary research, uh, into architecture and healthcare and manufacturing and robotics.

But he was talking about this concept called tensegrity, right? And so I was thinking about, as I mentioned, the shape here of the index returns, and I thought about that these almost look like supports for a bridge. And if we actually were to connect them with a student support system here, cables, it almost looks like a bridge down here. Well, tensegrity is about that tensional, integrity and structure using opposing forces and elements together to create a balanced stable structure, right? So you have some things that are under pressure, some things that are under tension. And if you think about where you see this, it goes all the way down to the human cell level, your muscles expanding contraction. When you walk, you can see it in kind of do geodesic domes, where you have structure very lightweight,  you can, and, uh, you know, creating that, uh, that’s that structure, camping tents, it’s in sculpture, it’s all the way down to the human cells.

We can even think about it in the context of some toys. So this here is a nice tensegrity structure, right? It’s flexible, it’s structural. And if we think about this, maybe being a portfolio as we’ll talk about it actually can have some elements to it. So as he was talking, uh, I really thought that tensegrity was a good way to describe portfolio design. We think about diversification and allocation. We think of the portfolios as some of the parts we think about the strength of the portfolio coming from the asset allocation and a good way to think about that is with, you know, a wooden dowel here as well. Right? So if we think about a wooden dowel being one asset class, right, it’s got some flexibility, it’s got some strength, but quite frankly, it’s not that strong. If we put a number of those together number of those asset classes together, well, suddenly we’ve got a portfolio and what’s holding them together.

Is your financial plan, your investment policy statement. We have far more strength. We do have some flexibility. We have some adaptability torsionally maybe longitudinally as well, right? Going back to the child’s toy. If you think about each of these struts being a different asset class, they’re all interconnected by these elastic bands, but this is also how each asset class interconnects with itself, right? Some asset classes will do better than others. Some will do, uh, you know, under-performer over perform. Sometimes the portfolio does poorly. Sometimes the portfolio does quite well, but it’s a way, if you think about it, tensegrity as a way to create flexible structure, it still has to have some shape and it still has to have some design and it still has to have evidence-based approach. So when we think about portfolio design and investing in developing an investment strategy during times of volatility, we have to think about evidence based approach, incorporating sound and disciplined investment principles.

We always think about focusing on quality. We allocate globally. We rebalanced to absorb those market dips and swings and above all the diversification and asset allocation are absolutely critical. When we think about how to reduce volatility during times of high volatility as we’ve been experiencing this year. So it really is a way tensegrity is a way to think about how do we create that portfolio? How do we create structure? How do we do it in a disciplined way? And how do we make sure that the portfolio is adaptive for your needs and your goals over the long period of time? So I hope you found this talk in this visual, uh, informative and helpful. If you have any questions, please reach out to your wealth manager. You also can reach out to me. I’m always available here to talk with, with clients. I want to thank you very much for the trust and competence in your time today. Thank you very much. Appreciate your time.