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Reflections From Over Four Decades                                                               Join our Monthly Newsletter              October 2018                                                                                              

Carl W. Hafele, CFA, CPA

Co-CIO, Principal


As a student of the investment game for now over 40 years, I am frequently asked a few common questions. They are:

  • What do you think about these markets?
  • Are alternatives worth the hassle? Why not just go 60/40 and forget about it?
  • How do you compare the investment world of personal high net worth (HNW) investors versus institutional investors?

I’ll try to succinctly answer each below.

I like to answer question one in several fashions. First, markets love to party, and party hard indeed. Invest with them, but realize odds are high that markets – whether stocks, bonds, real estate, etc. – will overshoot on the high side and follow it up by overshooting the downside. Second, sound economic policies are essential for long term success. Valuation levels are important in the long run and worth little in the short run. Last, it truly is “different this time” as we have conducted a great experiment with the Fed quintupling its balance sheet. The unwinding and interest rate normalization will indeed provide some indigestion for all!

Alternatives or 60/40 Mix?
Through many years, traditional investors have had a simple portfolio of 60% stocks and 40% bonds. And it worked for many decades – until we experienced two 50% drops in the S&P 500. Another reason it worked is the fact that interest rates went from over 15% in 1981 to just under 1.5% a few years ago – quite a bull market in bonds!

Yet as rates rise and expected lower rates of returns for equities predicted by many materializes, the 60/40 mix won’t provide investors the needed and expected returns.

Alternatives – particularly if you have access to better managers in the asset class as we do – clearly reduce risk in your portfolio and increase returns over the cycle.

HNW vs. Institutional Investing
With nearly two decades of experience in both investment management worlds, there are some important similarities and noticeable differences. Similarities are the importance of designations – CFA’s, MBA’s, PhD’s, Law Degrees, etc. – which provide more credibility with investors. Asset allocation drives returns and diversification reduces risk wherever you are investing.

In the institutional market, dollar amounts are typically much larger than HNW investors and have many formalities regarding reporting. Institutions utilize third party consultants to ensure the gatekeepers are fulfilling their fiduciary duty. In addition, regarding differences, much has been written about HNW “chasing returns” and typically buying high and selling low – a great recipe for super low returns and quite high levels of risk.

At Lanier, we are a group of experienced and educated investment professionals that love the markets, believe alternatives increase return and reduce risk, and bring the sophistication and experience of the institutional markets to our HNW investors. We look forward to serving our clients for decades to come.


Carl W. Hafele, CFA, CPA, is Co-Chief Investment Officer and Principal at Lanier Asset Management. He is also an instructor in Finance and Economics for the MBA program at Bellarmine University.

September 2018: A Decade of Assisted Recovery

August 2018: The Entitlements Train Wreck - Possible Solutions?

July 2018: Is Wage Growth In This Country Improving Over Time?

June 2018: The Impact of Corporate Tax Reform

May 2018: Kentucky Derby Talks - Bulls vs. Bears

April 2018: How Much Longer Can Interest Rates Stay So Low?

March 2018: Policies For Economic Growth

February 2018: Volatility

January 2018: So What's In Store For 2018?

December 2017: Tax Cuts and Jobs Act: Good or Bad for Me? It Depends.

November 2017: Whack-A-Mole - D.C. Style

October 2017: Should You Consider a Robo-Advisor?

September 2017: Alternative Investments - What and Why?

August 2017: The QT Quandary

July 2017: Quality of Life Influencers (Cont'd)

June 2017: Quality of Life Influencers

May 2017: Repatriation Myths and Realities

April 2017: Time to Invest in International Equities?  Let's Take a Look...

March 2017: Valuation - A History Lesson

February 2017: The Prince of Darkness

January 2017: Mountains of Debt - Does it Matter Anymore?

December 2016: Trumponomics: Reagonomics' Twin?

November 2016: Found Money

October 2016: Marrying Theory and Practice

September 2016: Do You Have a Sharpe Portfolio?

August 2016: Be Careful of High Dividend Stock Strategies

July 2016: "Die Younger" is Not a Strategy

June 2016: Blame Tina

May 2016: Would You Rather:  Tax Cut or Tax Increase?

April 2016: Father Time Demands Your Attention

March 2016: What Has the Last Year Taught Us?

February 2016: Winners and Losers of the Oil Battle

January 2016: Diversification Improves Returns and Lowers Risk

December 2015: Synergy and the Art of Building High Performance Portfolios

November 2015: Take Control...or the Government Will For You

October 2015: A Note from Our Dean of Business

September 2015: Double Espresso at Midnight

August 2015: An Allocation to Hedge Funds - Essential!

July 2015: Another Greek Tragedy?

June 2015: What Does Financial Planning Mean To You?

May 2015: The Active vs. Passive Battle

April 2015: Out on an Island – Preparing for the Fed Rate Hikes

March 2015: To Fee or Not to Fee?

February 2015: European Central Bank Tries QE – Will it Work?

January 2015: 2014 Recap