An investor profile and the consideration of art as an alternative investment

by leslierankowfinearts

LAST WEEK I HAD AT THE OPPORTUNITY TO INTRODUCE WIN SMATHERS, MANAGING DIRECTOR OF THE INVESTMENT FIRM, HUNTER ASSOCIATES, TO YOU. WIN INITIALLY PROVIDED US WITH A VIEW INTO THE INVESTMENT PHILOSOPHY OF THE FIRM, ITS CONCENTRATION ON INDIVIDUALS AND FAMILIES AS I THOUGHT THAT WOULD BE HELPFUL BEFORE WE INVESTIGATE THE SPECIFICS OF ART AS AN ALTERNATIVE INVESTMENT.

HOW DO YOU ADVISE YOUR CLIENTS? IS THERE A GREAT VARIATION IN YOUR APPROACH DEPENDING UPON THE PARTICULAR PROFILE OF A CLIENT?

We have a consistent framework we work within when constructing a portfolio for a client but view each client as unique. Our portfolios typically look very similar in terms of the individual holdings owned but the asset allocation between stocks, bonds, cash and alternatives will differentiate one portfolio from another. The asset allocation is determined by a client’s unique objectives, risk profile and time horizon.

WHY HAS HUNTER ASSOCIATES OPTED FOR THIS APPROACH WITH ITS CLIENTS? IN WHAT WAYS IS IT SUPERIOR TO THE ALTERNATIVE INVESTMENT APPROACH, FEE STRUCTURE AND PORTFOLIO MANAGEMENT?

We are in the business to take care of our clients’ money. While this seems overly simplistic, you’d be surprised at how this phrase resonates with them. Our business mantra is to understand our clients, tailor a comprehensive wealth management solution to them rather than force them to fit a standard solution and bring our diverse talents and skill-sets to the relationship for a reasonable fee. Furthermore, our people are 100% committed to superior client service. We like to think this is a clear differentiator in the market.

IN TERMS OF INDIVIDUAL AND FAMILY WEALTH MANAGEMENT, HOW DO YOU DECIDE WHAT PERCENTAGE SHOULD BE IN CONVENTIONAL STOCKS AND BONDS AND WHAT SHOULD BE ALLOCATED TO ALTERNATIVE INVESTMENTS?

This comes back to understanding the client. We realize that stocks provide the best long-term inflation adjusted returns. But yet, this asset category is the most volatile. We take into consideration a client’s emotion psyche for volatility, their objectives for their wealth, current and future income needs, their ages and investment time horizon, liquidity needs and investment IQ when establishing the relationship in the portfolio between stocks, bonds, cash and alternative assets.

OTHER THAN ART, WHAT ARE OTHER FORMS OF ALTERNATIVE INVESTING?

The simple answer is anything other than stocks, bonds and cash. However, the common answer in our community would be: real estate, commodities, hedge funds, private equity, venture capital, MLPs, precious metals, stamps and other forms of collectibles.

HOW DO THEY FACTOR INTO SOMEONE’S PORTFOLIO? OBVIOUSLY A GREAT DEAL IS DEPENDENT ON THE PERSON’S AGE, OVERALL WEALTH AND RISK TOLERANCE. WHAT ARE OTHER CONCERNS AND CONSIDERATIONS?

Many but certainly not all investment advisors recommend using alternative assets to construct a well-diversified portfolio. Diversification comes from owning assets that are dissimilar or non-correlated to each other. Each asset category possesses its own unique set of risk and return characteristics as well as liquidity constraints.  The idea or aim is to build a portfolio that produces the appropriate risk adjusted return to best meet the client’s unique objectives.

THANK YOU, WIN.

NEXT TIME, IT WOULD BE INVALUABLE FOR YOU TO PROVIDE YOUR INSIGHTS INTO THE NEW INDICES AND MEASURES OF RISK AND RETURN IN THE ART SECTOR , A TOPIC EXPLODING IN SUCH PUBLICATIONS AS THE FINANCIAL TIMES AND WALL ST. JOURNAL.  IF YOU HAVE SPECIFIC QUESTIONS OR CONCERNS PROVOKED BY THIS INTERVIEW OR THESE ARTICLES, PLEASE FIRE AWAY.

ALL COMMENTS ARE WELCOME AND SUGGESTIONS FOR FUTURE BLOG TOPICS!