I received a beautiful brochure from JP Morgan Asset Management that said that their Smart Retirement strategies have been widely recognized for their strong risk adjusted and consistent returns. These are target date funds that invest in other funds and vary the exposure both across and within different asset classes as the investor approaches a targeted retirement date. This active portfolio allocation over time is called their “glide path”. They speak of how their vast human, financial and information resources have resulted in their being the best performing target date funds in the industry. They have a 10-year return and volatility graph to prove it. Their performance does look better than their competitors’, and the overall presentation is quite reassuring.
A team of experienced investors, most of whom have spent their entire careers at JP Morgan, employ a multifaceted approach to “temper the greatest risk of all – whether investors will be able to afford to retire.” They take into consideration their capital markets forecasts, views on potential regulatory changes and even assumptions about the investors’ own behavior. As a whole, the overwhelming display of institutional narcissism works, until you look more closely at the numbers. How is it that such a preeminent firm can’t do better than this? I own my own advisory and work with a few other analyst/advisors. How can my comparatively focused investment approach produce better results than theirs? Simple. JP Morgan, like the rest of the industry, is managing investment risk and return with diversification and assumptions about future returns and correlations, applying the same basic tenets of modern portfolio theory that first appeared in 1952. This theory is based on the belief that trend-following like that used in Trendhaven’s Managed Risk strategy is impossible, despite its existence in reality. It’s your retirement. Don’t get blinded by preeminent convention.