White Paper No. 28: Good News for Pennsylvania Trust Beneficiaries: The Principal and Income Act of 2002

The Uniform Principal and Income Act was first promulgated back in 1997, but it wasn’t until July 15, 2002 that the Pennsylvania legislature got around to enacting it. The purpose of this white paper is to outline the key provisions of the Act and to explain why it is so significant for trusts, trustees and, most important, trust beneficiaries.

White Paper No. 27: Typical Steps in the Advisory Process for Families

White Paper No. 26: Typical Steps in the Advisory Process for Endowments

White Paper No. 25: Hedge Fund Investing: The End of the Beginning

This white paper provides an overview of the hedge fund industry as it exists today, and identifies the myriad risks facing hedge fund investors, including the lack of transparency and an excess of capital chasing too few funds. The paper also illustrates how diversification techniques and careful selection can mitigate these risks.

White Paper No. 24: A Modest Proposal: Let’s End Conflicts of Interest in the Wealth Advisory Business

The problem of financial conflicts of interest is a perfect example of our ability to understand a concept intellectually but fail to grasp its full significance. This white paper explores examples of conflicts we knew existed, but the consequences of which were monstrously underestimated.

White Paper No. 22: Corporate Crooks and Investor Trust

It’s gotten to the point where we’re afraid to turn on the news or pick up a newspaper. Like most investors, Greycourt has been deeply disturbed by the chicanery and outright fraud that have come to characterize too much of corporate America. But before we give in to despair and take investment action that could be damaging to our wealth, let’s step back and try to put the current, appalling situation in perspective. While it is too early for any of us to understand all the implications of the Bubble Markets of the late 1990s and the resulting corporate scandals, some of those implications are already apparent. Not all of them will be palatable to investors, but the willingness to stare unpalatable truths in the eye is one of the hallmarks of successful investing. Here is a summary of those implications.

White Paper No. 20: Modern Portfolio Theory and Quantum Mechanics

The year 2002 marks the 50th anniversary of the publication of Harry Markowitz’ seminal paper on mean variance optimization, a then-obscure event which nonetheless inaugurated what we now know as modern portfolio theory (MPT). Over the following five decades, Markowitz and his followers have contributed enormously to our understanding of the behavior of capital markets and of the nature of risk and its relationship to investment returns. MPT has, in a broad way, allowed us to model how markets are likely to behave over very long periods of time, and has therefore allowed us to base the design of investment portfolios on principles that are at least in some fundamental way related to likely market behavior. For investors born after MPT concepts were incorporated into real-world investment portfolios, it’s hard to believe what a revolutionary change MPT has occasioned.

White Paper No. 19: Concentrated Security Positions: Four Commonsense Principles

Many wealthy families hold all or most of their wealth in one highly appreciated security. Sometimes that stock represents a control position in a family company, but more often the holding has resulted from a sale of the family company for stock in a public company. If the sale occurred just prior to a bull market, the family may believe that owning one concentrated security is an excellent way to create significant wealth. This was certainly the case with many families who sold their companies in stock deals during the 1980s and 1990s. Unfortunately, periods like those two decades come along far less than once in a lifetime. The purpose of this white paper is to suggest a commonsense approach to dealing with large, concentrated stock positions, having in mind that there is a difference between a bull market and a sound investment strategy.

White Paper No. 17: Taming Your Trust

When families consider the prospect of having to establish appropriate provisions in trust instruments for spouses, children or future generations, they naturally approach the matter with trepidation. There is, first of all, the problem of attempting today to design provisions that must work well many years, perhaps many decades, into the future. There is the further problem of dealing with intra-family emotions and stresses that tend to interfere with otherwise good judgment. Finally, there is a natural tendency to be intimidated by the legal and tax complexity that appears to surround the arcane world of trusts.

White Paper No. 16: Family Investment Partnerships

Many wealthy families are familiar with family limited partnerships used to discount the value of intra-family gifts. But limited partnerships can also be used as investment vehicles, and this strategy offers many advantages. This white paper discusses family investment partnerships, which represent a kind of private, family “mutual fund” for family members and other family units such as trusts or foundations.