Why Does FINRA Have an Investment Portfolio?
Here’s an odd one including FINRA that you may have chosen up in the last couple of days. Obviously, it has a big, $1.6 billion financial investment portfolio, and the returns have been weak, according to the Wall Street Journal, underperforming a 50/50 equity/fixed earnings portfolio for several years.
The WSJ post is woefully insufficient. It does not say what the function of the portfolio is, it is uncertain how it can even have a portfolio, and there are no specifics regarding what the portfolio is benchmarked to aside from a referral to custom criteria. The origin returns to 2004, and it came out of the blocks attempting to replicate the college endowments, which at that time were revered. As a side note, the tide might have headed out some for several of the endowments, but there is still plenty to discover property allotment from them.
As the story goes, the FINRA portfolio chose to substantially minimize its equity direct exposure in, um … 2009. The short article supplies no information on how much equity direct exposure it had at that time, but the portfolio underperformed a 50/50 in 2008, or how much it has now, but there is a quote from a spokesperson about targeting an “a lot more conservative method than a 50/50 standard.”.
The details of the newspaper article are quite muddy, but there are a few conclusions that I think stand that can be gained from. Beginning a fund developed to imitate endowments at the peak of that trend was plainly performance chasing, and if it cut its equity direct exposure as a possession allotment choice in 2009, even if it went from 20% to 10%, somebody worried.
I have been a big fan of endowment-style investing returning to the 90s, not as something to imitate but to gain from, I have been affected by them as far as using what is now described as options, that I was calling diversifiers back when I began blogging about them.