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Blaze Portfolio Speaks With RIAs About Expanding Returns On Low-Risk Investments

Blaze Portfolio Speaks With RIAs About Expanding Returns On Low-Risk Investments

Because the Federal Reserve has had rates pinned near zero for seven years, only punching above 1% since mid-2017, investors have suffered a long period of minuscule returns in the lowest risk asset vehicles. These returns have slowly worked their way north of 2% over the past year, but their promise has stalled as the Fed struggles to act in the current low inflation environment.

We at Blaze Portfolio were curious how this has affected investment strategies and asset allocation plans, so we asked several registered investment advisors how they've counseled their clients on fixed income, rate dependent and other low-risk assets.

Eric Rosel, Co-founder, Morgan Rosel Wealth Management, Denver, CO, $200M AUM

"Increased return on low-risk assets is something that both we as managers and clients are well aware of. In fact, some of our new clients have come to us specifically because of this opportunity; the desire to improve their return on low-risk assets. It's been a nice change to be able to allocate to money markets and short-term bonds and realize real returns after fees."

Alec Berens, Director of Research, Sterling Investment Management, Scottsdale, AZ, $300M AUM

"We generally run a low cash balance, but some clients have reached out to us to see that their cash positions are getting the benefits from money market rates that are higher yielding than typical brokerage sweep accounts. We actually prefer Treasury bills over money markets, which often have underlying holdings such as international paper which we prefer to avoid."

Walter Dewey, Co-founder, Resonant Capital Advisors, Madison, WI, $448M AUM

"For our clients, it's a welcome relief to see cash positions keeping up with inflation after years of zero returns. As managers, we're willing to allocate more of our fixed income assets to cash, especially with the expected returns on bonds in line with the returns available in money markets."

Paul Meehan, Managing Director at Edgemoor Investment Advisors, Bethesda, MD, $960M AUM

"Being able to obtain returns north of 2% on short-term bonds and similar instruments may not seem to be much to cheer about, but it has made an impact on our investments. Where in the past we tended to keep cash holdings in zero-returning, but stable money markets, we now are making much greater use of short term bonds and short bond funds."

Tim Medley, President, Medley & Brown RIA, Jackson, MS, $900M AUM

"We are really not affected by the rise in returns, perhaps because we remember the long history of money markets yielding around 5.5%. So when you go from fractional returns to 2.2% we are not that excited, although to be sure, clients are happier than they were getting basically zero."

Relative Returns is another factor that certainly affects perspective on the modest returns available in money markets and bank instruments. Should we see a reversion from the long bull market and enter an extended period of slim or negative returns, it's quite likely that advisors will find clients considerably more motivated to sit on assets producing a slim, but steadily positive, return.

Visit for more insight into how return rates are affecting contemporary portfolio strategies.

Posted-In: Blaze PortfolioFinancial Advisors Education Personal Finance Interview General


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