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Home : About Greycourt : News and Events
October 2, 2003
CIO Greg Friedman Interviewed by Fundfire:
Greg Friedman, Greycourt's Chief Investment Officer, was interviewed by online newspaper Fundfire yesterday about his views on the prospects of growth versus value managers. The article
follows.
HNW Confidence Rebounds, But Managers Beware
By: Andrew Willmott
Optimism is growing among high-net-worth investors as levels of wealth rise again. But, along with that come higher expectations. Woe betides the manager that isn’t keeping up. The ranks
of U.S. millionaires have swelled again recently to 3.8 million, according to a new study from NFO World Group http://www.nfow.com. That
represents an increase of 14% over the same time in 2002, when the number of wealthy households totaled 3.3 million. And as high-net-worth investors have clawed back their wealth, their confidence in the economy is
also on the upswing. Half of all millionaires participating in the study feel that the stock market and the NASDAQ will continue to improve over the next six months. A year ago, just more than a third of them felt
that way. The recovery of lost ground validates financial advisors, comments Jeanette Luhr. She is research director at NFO Financial Services and the program manager for the study. More than two-thirds of the
millionaires surveyed use a professional advisor. Investors seem to have listened and understood the message that portfolio diversification and long-term thinking are the best ways to protect their assets, Luhr
points out. Of the respondents, 55% made few changes to portfolios last year, preferring a ‘wait-and-see’ approach. Most also seem to have stuck by their advisor, demonstrated by an average relationship time of nine
years. Managers, however, may have cause for worry, at least according to anecdotal evidence. “We have seen an increase in investors looking at new managers,” observes Rawson Hubbell. He is a managing director in
David L. Babson http://www.dlbabson.com’s financial planning group, which advises ultra-wealthy families. “They may have been patient on the
way down, but are not on the way back up,” he explains. “They want to get back where they were quickly, and they expect managers to get them back there,” Hubbell continues. There’s a noticeable increase in
restlessness if managers aren’t capturing the rebound, he believes. Others who advise the wealthy also see some managers at risk. “I think we are going to see more manager turnover,” agrees Greg Friedman, CIO at
Greycourt & Co. http://www.greycourt.com, a consultant to wealthy families. He believes that aggressive growth managers are most at risk. “Clients invested with those managers hoping for out-performance when the
market comes back,” Friedman explains. If that doesn’t happen, then terminations are likely, he says. Value managers, meanwhile, are a little safer, Friedman continues. Value managers protected capital during the
down market, he reasons. Growth managers didn’t, but investors stuck by them specifically to see some benefit on the upswing, Friedman outlines. If there is no benefit, they could be cut off, he concludes. NFO’s
Luhr says that she sees no evidence in the study that the market rebound is giving investors an itchy trigger finger. In fact, she points out, 18% of millionaires switched assets from one manager to another this
year, compared to 25% in 2001. Where managers fall below performance expectations, money is moving, but that’s always been the case, Luhr notes. Allocations have surprisingly remained fairly stable, Luhr continues.
One noticeable change has been the level of real estate assets in portfolios, up to a 20% share from 10% last year. Much of that is down to a rise in value rather than investors necessarily pouring more assets into
property. The Affluent Market Research Program is based on a representative national sample of approximately 3,300 households with a net worth of $500,000 or more, excluding primary residence. The mail-based survey
includes an over-sample of households with investable assets of $1 million or more.
For a copy of the study, contact Maria Erickson at (813) 227-8562.
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