Every 100 posts, I take a step back, and think about where we have been.  My, I have been a busy bee.  And I have blogged more than usual over the last three months.

In the recent past, I have completed my “Flavors of Insurance” series.  I also wrote a series on investment modeling.  And I wrote a complete series on my eight portfolio rules.  I have created a book review database that I will continually update.  And in this time I have given two talks, one to the Society of Actuaries at their Annual Meeting, and one to the CFA Society of Denver, together with the Leeds School of Business at the University of Colorado.  Add to that my two award winning articles that I mentioned yesterday.  And this is in the midst of this, I have written more than ever.

Now as an aside, do you know who I am happy for?  Trader Mark.  I am glad that he has gotten enough subscriptions that he can start his mutual fund after the SEC okays it..  He seems to be a bright guy, and I wish him all the best.  He has more than $10 million of commitments.  Good for him, and I hope it grows from there.

As for me, by the end of January 2011, I have no idea how much I might be managing, it could be as small as $3 million, or over$10 million.  Many people have indicated interest, but the test is how many commit.  I won’t be disappointed if I hit the low end of the range, but I would not be surprised if I hit the top of the range, or exceed it.

What I am Doing

Because of many questions from readers, I want to give a brief description of what I am doing.  There is some confusion over what I do, because I have been a bond manager, and a lot of my investing is informed by conditions in the bond market.  I follow a lot of markets, because they are related, and knowledge of the whole sharpens understanding of particular markets.

But I invest in stocks.  Mostly stocks in the US, with a value orientation.  I rotate industries, as I have often written about.  I run a concentrated portfolio of 30-40 stocks.  I adapt to market environments.  Markets are very difficult to time, but if you are in stocks that have a margin of safety, a cheap valuation, and the industry is experiencing an increase in pricing power, it is hard not to earn good returns over time.  The rest is summarized in my eight rules.

The ideal here is to give investors a clone of my portfolio through separately managed accounts.  Each account has its own portfolio, which can then be be managed for tax purposes, unlike a mutual fund.

I am offering taxable accounts, IRAs, and other tax-deferred accounts.  I am not afraid of being called a fiduciary under ERISA standards, because I manage all money to those standards.

I am also offering market-neutral management of assets for taxable accounts, at no more cost than long only.  And, my fees are not high — 1% on assets between $100,000 (minimum size) and $1,000,000, 0.5% on assets over $1,000,000.

As it stands, next week I am going to start inviting those that have already contacted me to open an account at Interactive Brokers, and will send them a package of other materials via e-mail to complete the deal.  After that, I manage their money on a discretionary basis, mirroring my own trades.  I get the same execution levels as my clients.  We all trade together.  I will eat my own cooking, and at minimum 50% of my liquid assets will be invested in my strategies. At present, it is 80%+.

Aside from that, I have minimized the cost of trading by using Interactive Brokers.  Particularly for smaller accounts, it is the best solution.  Using Interactive Brokers means investors get cheap trades, while I pay fees to access market data.  Those costs get paid by investors through higher commissions in many other situations.  I bear those costs here, and I do not take soft dollars.

I start my investment management practice in early January.  I am really encouraged by this, and look forward to serving my clients.

What Remains

These are the few things I need to get done before I start:

  1. Compliance Strategy, Including Web Compliance Strategy, CFA Document Retention
  2. Procedures for suitability – CFA notes on such to guide
  3. Investment Policy Statement

I have the data together for most of these, though I have a question for those that manage equity money for clients through separate accounts.  What do you do on suitability?

What I need to get done will get done next week, and I will start taking client assets in 2011.  I thought of doing this in 1996 and 2003, but did not do it because I did not have enough assets of my own to buffer me if it did not work.  Now I can do it, and last for many years.

Those who inquire of me can see my 10-year track record.  I’ve done well, but that does not mean that I will do well in the future.  But I will do my best for clients.

The Blog

There are some that worry that I will stop blogging.  That is not my plan.  If I could write at RealMoney while working for a hedge fund, I can blog under the same rules with separate accounts.

But some things will change.  I will delete my portfolio at Stockpickr.  Only clients will know my full portfolio.

I don’t have any public stock positions other than what is in my portfolio.

Aside from the market-neutral accounts, there are no derivatives.  And I will let client know whether I am market neutral or long only, or a percentage thereof, before I do it.  Right now I am long only.

I will not write as much about portfolio management, at least on a detailed basis.  I will provide more detailed information on portfolio management issues to clients.


One thing I have strongly believed since starting my blog — my readers have alternative uses of their time.  I thank them for taking time to read me.  I am humbled by the large reception I have received over the  years, and thank those that take their precious time to read me.

Soli Deo Gloria


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