Dissection of an Investment Presentation (Part 6)

Today I will conclude analysis of the investment presentation referenced here.

The third-to-last slide discussed lists managed account formats and related information. Formats exist for “Market Series” and “Factor-Enhanced Series” accounts. This presentation has focused on the latter. Formats include “UMA Sleeve,” “SMA Beta,” “SMA Tax-Optimized,” and “SMA Custom.” Minimum investment ranges from $60,000 to $750,000.

The penultimate slide lists investment management fees. The factor-enhanced “quantitative portfolios” (QPs) range from 0.20-0.25%, which it states is 5-10 basis points above average. This is cheap compared to the standard 1% fee most financial advisors charge, which includes non-investing services. It’s not as cheap based on my incremental value calculations. I think a big difference exists between investment styles, though. This appears to be a passive, plain-vanilla investment offering that generates subpar performance yet still represents significant improvement. Mine is an active investment approach.

The summary slide says the factor-enhanced QPs “deliver the potential for excess return.” This may be the best line of the whole presentation. Many things have potential. This is no guarantee nor is it an exaggerated conclusion drawn from the content provided.

This line suggests everything in the presentation amounts to circumstantial evidence, which relies on inference to support a claim. Plenty of instances have been discussed where incomplete or flawed logic begs inference to overlook. In Part 1, I talked about potential data-mining bias. In Part 2, I talked about incomplete/empty phrases that work well for sales and marketing. In Part 3, I analyzed performance graphs potentially related to but not direct portrayals of the factor-enhanced QPs. In Part 4, I mentioned missing analyses of the very important drawdowns and flat times. In Part 5, I talked about a number of irrelevant labels sounding professional and persuasive.

Circumstantial evidence is one step below direct evidence. I mentioned a lack of supporting evidence several times throughout this dissection. A large emphasis of sales and marketing [advertising] is staging circumstantial evidence to persuade. I suspect many people fail to realize what is missing. People may also get distracted from the fact that the evidence is incomplete. The presenter (or presentation) can achieve this any number of ways such as with establishment of rapport, with emotional appeals or humor, with polished public-speaking skills, etc.

At the end of the day, this is another instance of performance omission by an investment manager. Eleven other such mentions were given in this blog series. At the very least, I think this investment offering is as good as any other. While professional and somewhat convincing, however, given the circumstantial nature I certainly would not bet on outperformance.