**Monthly Newsletter – 2016 End of Summer**

b766f928-4c8e-4a89-8445-a7c7b26155c3Firm Update

We hope everyone had a great summer. Our last newsletter was in May, so we have quite a bit of ground to cover. That said, we aim to keep this newsletter short.

Below we will discuss the markets, products as well as highlight a major regulatory change that will dramatically impact the financial advisory landscape. These regulatory changes will have little to no impact on CRA, as the firm currently operates under the new guidelines.

This summer saw the firm’s continued expansion in terms of clients and assets under management as well as finalizing a move into our new office space. As we approach the final quarter of 2016, and into 2017 we look forward to continuing providing unbiased investment advice and planning for our clients. As an independent RIA firm, we are not limited in our investment product selection. We work with only the most tax efficient, liquid, transparent and low cost investment products available and on the industry’s leading technology platform Every investor should have access to institutional quality products, fee only advice and have their assets on an industry’s leading custody platform.

Market Update
–Dave Falicia

The markets have been on a very good run over the last few months. The broad stock market is up 4% over the last 90 days, and it is up nearly 8% year to date. The performance of equities goes hand in hand with our view that the US economy is actually in decent shape. Many commentators and analysts in the industry have been quick to find fault with the overall health of the economy, but this is simply not the case. Home prices continue to rise nationally, inflation is muted and GDP is growing at a manageable pace.

We expect the Federal Reserve to make another incremental increase in short-term interest rates this year, and to continue doing so into 2017. We have felt for years that the Fed should have begun this process some time ago and it finally appears that they have run out of excuses to keep interest rates artificially low. This morning’s job’s report, reflecting a good economy, may still not give the fed enough reason to make a move in September.

We also feel strongly that the current interest rate outlook should have minimal long-term impact on the markets. We expect that the measured pace of Fed policy will allow ample time for markets to adjust to rate hikes. The ultimate goal implied by the Federal Reserve is that normalized short term interest rates should be approximately 3%, and given the pace of the expected hikes it will take a long time for that to be realized. However, as we begin to see this realized shift in rates we will continue to look for opportunities to adjust and re balance client portfolios as needed to take advantage of the changes in the rate curve.

Product and Regulatory Update
–Jim Etten and Dave Falicia

Over the past year our clients have benefited from core equity ETFs and actively managed funds that focus on the fundamentals. In addition, we have been seeking specific ETFs and funds that focus on corporate fundamentals along with consistent dividend performance. Although this strategy and group of investment options has performed positively, we continue to keep an eye out for any downside risks that may arise and will adjust and weigh risks accordingly.

With a shift in interest rates on the horizon, we will start seeing more value on the Fixed Income (Bond) front. Investments that allow us to reduce interest rate sensitivity, while still providing attractive yields will come into focus. As conditions exist now we have a good mix of options in both credit quality and duration for our clients in the fixed income market but that list will continue to grow as more opportunities present themselves going forward.

In addition, we continue to interview managers and thoroughly analyze alternative investment options. These “alternatives”  seek to provide returns that are non correlated to moves in the broader equity and fixed income markets. We are in the process of narrowing down the list to a few select holdings that we feel would meet the needs of our client base.


Regulatory Changes

The Department of Labor (DOL) recently passed sweeping reforms aimed at returning up to $17 billion dollars a year to investors that the government estimates is taken by firms charging excessive fees. The rule(s) take effect next April, and requires all financial advisers to recommend what is in the “best interest” of a clients needs when they offer guidance on investment accounts. Brokers and Broker Dealers face the greatest disruption to their business models. It is expected that firms such as Edward Jones, Raymond James as well as the largest bank/brokerage firms in the country will have to significantly change the way they operate and provide advice to clients. This change will come at a significant cost to these firms in terms of compliance, training as well as much needed cultural change.

In terms of the new reforms Independent RIA’s such as Copper River are not directly impacted as RIA’s already operate in the “best interest” of their clients by serving in a fiduciary capacity. RIA’s already operate in a “fee based” model and do not receive commission, kickbacks or take a spread on any investment product in turn allowing a clients goals to be properly aligned to investment selection and risk parameters. The financial industry expects the rule change will be a big win for RIA’s, and will only speed up client defection and advisor defection to the RIA model, a trend that has been taking place over the last decade.

Should you have any questions or wish to discuss any of the information above in greater detail please do not hesitate to reach out to Dave or myself at anytime.

Have a great Labor Day Holiday!

Jim & Dave


**Monthly Newsletter – MAY 2016**

Firm Update
The first part of the year found CRA moving to a new and larger office to accommodate our growth. The move also forced us to redo our entire internal technology platform(s) to include a new portfolio management system, data delivery platform as well as all the accompanying hardware and software that goes with moving into a new space.


The last few months have been extremely busy for Dave and I as we have had very little time to take to the monthly newsletter. Going forward, we are going to move from a monthly to a quarterly release. We are all overloaded with emails in our daily lives and less is often best.

As we soon go into the second quarter of 2016, the firm looks forward to continuing providing unbiased investment advice and planning for our clients. As an independent RIA firm we are not limited in our investment product selection. We work with only the most tax efficient, liquid, transparent and low cost investment products available and on the industry’s leading technology platform Every investor should have access to institutional quality products, fee only advice and have their assets on an industry’s leading custody platform.


Market Update
–Dave Falicia
Springtime in the Rockies, and at Copper River…

I hope everyone is having a great spring. As we wait for the last remnants of winter to give way to green grass and warmer temperatures it would appear that the markets have also taken on a spring outlook. The general sentiment is that contagion fears with the Asian economic slowdown, as well as the steep fall in oil prices have demonstrated a minimal effect on the US Economy. Recent employment reports over the past 6-8 months have been very encouraging. Housing, production, and inflation have all been consistent with a stable economy. That said, it only takes a few data points to get market participants’ nerves on edge, so we will be watching for those situations as potential opportunities for our clients.

While there still remains some downside risk to the markets and the economy as a whole we feel that we can now safely deploy assets in a less defensive manner than we have done over the past 6-8 months. We have begun to move assets out of cash and into our Core and Non-Core Investment allocations as appropriate for each clients’ portfolios. Beyond our Core Fixed Income and Equity allocations we feel that opportunities exist once again in sectors that still remain in a bear market. These include second tier EU Countries, Emerging Markets, Small Caps, Health Care and Energy. We continue to be very selective in these areas but will take advantage of these opportunities as they present themselves where appropriate.

Product Commentary
–Jim Etten

Sector Rotation
At CRA we continue to focus on building individual custom portfolios based on a client’s age, risk profile and liquidity needs. One critical component of every portfolio is the ability to re-balance and overweight by an individual sector based on market opportunities as they present themselves. Currently, a number of sectors look inexpensive when compared to the broader market. These sectors often represent a great opportunity to capture an upside movement in price appreciation over a set time period. Using individual ETF’s is a great strategic tool to take advantage of these sector opportunities. A few sectors that we currently like going into Q3 and Q4 are as follows:

Oil and Gas. While this holding may bring anxiety to mind when recalling what happened to energy investors in 2014 and 2015 it is important to understand a few important factors. One, the oil and gas market has stabilized in 2016. YTD Oil has returned +5.75% and much in sync to the broader energy markets.However, on a one year basis oil is still down -27.95%. Given how far the energy markets have fallen and how they have recently stabilized we feel it is a good time to dollar cost into the oil and gas sector for a small portion of a portfolio using sector specific ETF’s.

Global Materials (MXI).The largest corporate holdings in the materials ETF is DOW Chemical, Du Pont and Monsanto. MXI has a 12 month trailing yield of 3.44% and YTD the fund is up +11.51%. The story here represents the beginning of the year fears of a global slowdown in China as well as other emerging economies. While these contagion fears have some validity going forward the economic numbers and data indicators behind the fear eventually proved to be inconclusive. While MXI is still down over -10% on a 52 week basis we believe it has room for significant price appreciation due to the sharp sell off late in 2015. The chart below represents the 1 year price movement on the ETF.

Russell 2000 Growth. This ETF is a core holding represented across almost all our model portfolio’s.The attraction to the overweight side follows the same story as mentioned above. A larger than normal market sell off in the beginning of the year followed by a gradual recovery. IWO holds a basket of 1,175 small cap U.S companies. The numbers are as follows: 1 Year -11.67%, 3 Years+ 8.07%, 5 Years + 7.84% and +6.05% over 10 Years.Last months performance of the fund turned significantly higher and returned an impressive +7.68%.

The historical returns of small caps over a long time period are impressive and important to keep in mind when building core blocks for any portfolio. The steep selloff over the last year in small caps and the recent price appreciation gives us reason to overweight the sector for the remainder of 2016.

Asset Allocation

At CRA our portfolio modeling is based upon our combined +30 years in the markets. Dave’s 20+ years as a portfolio manager at Oppenheimer adds significant value to our clients’ fixed-income portfolios. We have deployed a detailed process by which each of our clients are given an asset allocation template that is customized. With these customized templates we can precisely design portfolios that closely align with each client’s risk appetite and financial goals. The templates provide complete transparency and allows both CRA and our clients a comprehensive understanding of their portfolio risk weighting as well as its performance.

While the portfolio approach is easy to understand and can seem simple in nature the value of the advisory firm is our ability to fill the portfolio components with the best holdings available. This process of finding what holdings will be used and in what percentages takes up a majority of our time. As a core value of our fiduciary relationship all client holdings are based solely on the need of the client and are not subject to any outside influence.

Should you have any question on our portfolio modeling process and or any questions please feel free to reach out to us at our email below. Thanks!

Global Mobile Market Will Continue To Expand Over The Coming Years

While Apple is and will remain one of the world’s largest companies in terms of revenue for the foreseeable future it is important to understand just how large the smartphone vendor and the Telecom provider market is. It is also important to understand the global nature of the growth of the sector. We recently came across the following illustration in the WSJ that highlights the leaders and their penetration by % in these market segments. For the U.S telecom names we like IYZ which allows an investor to diversify in the U.S sector without taking single stock risk. Internationally, the ETF from iShares IXP allows exposure to the high growth seen in the sector outside the U.S. The performance of these ETF’s have shown consistent returns when viewed in 1,3,5 and 10 year basis.



Goldman Sees 11% Upside in S&P 500 After an ‘Emotional’ Selloff

With the markets experiencing a deep sell off to start the year investors need to keep in mind that corrections can happen inside a bull market. With the underlying U.S economy doing well, and the labor markets improving the fundamentals for the U.S are solid.

The first 14 days of the year do not represent an accurate indication of where the markets are going to end in 2016.
Please see posting below from Goldman giving insight on the “emotional” start to the year and the upside they see ahead.

Goldman Sees 11% Upside in S&P 500 After an ‘Emotional’ Selloff:

**Monthly Newsletter – January 2016**

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Firm Update[/x_custom_headline]

As we start the New Year and look back over the last year we want to thank all the individual investors and families that came on-board as clients in 2015. With the equity and fixed income markets performing sluggishly in 2015 more investors than expected came to us seeking tailored investment guidance as well as a new approach in 2016. Even though the broad markets struggled last year, we were still able to find pockets of performance in certain equity industry groups. We have also identified a few segments of the bond market where we could find yield without sacrificing credit quality.

As we start 2016, the firm looks forward to continuing providing unbiased investment advice and planning for our clients. As an independent RIA firm we are not limited in our investment product selection.We are free from the pressure to make recommendations based on the influence of a brokerage firm, bank and or institution. We work with only the most tax efficient, liquid, transparent and low cost investment products available and on the industry’s leading technology platform Every investor should have access to institutional quality products, fee only advice and have their assets on an industry’s leading custody platform.

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Market Commentary[/x_custom_headline]

Dave Falicia

I hope and trust everyone had a great holiday season.

Looking back at 2015, I’d have to say that we should be happy it’s over. No single asset class or sector outperformed relative to historical averages. The S&P 500 finished the year up only1% due to its dividend yield. The Bond markets struggled on fears of the Federal Reserve raising interest rates (which we continue to believe will be a good thing over time). Real Estate values through most of the country were stagnant in all but a few major metropolitan areas. Oil Markets continued to lay witness to a freefall in prices as OPEC decided to flood the markets in order to maintain sovereign cash flows. Other commodities lost value as China’s economy finally started to come back to earth. Hedge funds, often considered the “Smart Money”, which historically have done well in flat and down markets returned on average a meager 1.4%. Even cash, considered the safest part of the market (money markets and short treasuries) saw near negative performance relative to inflation.

Where does that leave us for 2016? We remain cautiously optimistic on several fronts. As far as the economy goes, U.S GDP is projected to grow in a way that still exceeds what economists consider sustainable. We expect employment data to continue on a positive trajectory. On the fixed income front, the bond markets should begin to produce attractive returns once the Federal Reserve coaches us through the next few rate increases. Historically, bond markets have shown they can absorb gradual changes in rates quite well, and we expect this will be the case again in 2016 and 2017.
Within equities the most stability will be experienced with value stocks, active funds run by exceptional portfolio managers with long track records of performance and low expense ratios. In 2016 investors have a great opportunity to add sector specific ETF’s to one’s portfolio to improve performance. With emerging markets we need to keep in mind that the markets may continue to show volatility due to numerous factors. This includes geopolitical events,currency fluctuations and interest rate concerns. However, this volatility can be an opportunity to invest on market dips into the sector. It can also be a reason to proceed cautiously which is dependent on each individual investors goals and risk profile.
In summary, we feel that staying prudently invested and well diversified through 2016 will continue to produce returns for our clients. 2016 should reward those who focus on the fundamentals in their portfolios and stick to a well laid out investment plan.Click here for a more in depth look at our outlook for 2016.[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Product Commentary[/x_custom_headline]

Jim Etten


At CRA we continue to focus on building individual custom portfolios based on a client’s age, risk profile and liquidity needs. One critical component of every portfolio and each client experience is the custodian. While we are open to working with a client’s custodian of choosing (State Street, Fidelity, Merrill, TD Ameritrade etc) we have come to rely on and have found a great partner in Schwab. Charles Schwab serves millions of individual investors who invest on their own, through a workplace retirement plan, or in the case of Copper River Advisors those investors who work with an independent financial advisor or RIA. Here are a few facts on Schwab.

Charles Schwab
–Headquartered in San Francisco with large operation in Denver
–More than 325 branches in 45 U.S. states and London. 4000 plus employees
–Charles Schwab is traded publicly on the New York Stock Exchange ticker symbol SCHW
Assets- Charles Schwab  
–$2.40 trillion in total client assets
–9.3 million active investment accounts
–1.3 million retirement plan participants
–950,000 banking accounts

–20th Largest U.S Bank

Independent Advisor Services-Provides trading, custody, technology, practice management and other support services to nearly 7,000 independent investment advisors whose assets represent 1.4 Trillion at Schwab.

CEO Walt Bettinger’s recent post on the RIA business and Schwabs relationship to the industry.


ETF Flows in 2015
ETfs continued to grow in assets in 2015 and the numbers speak for themselves. In 2015 ETFs took in $238 billion in new assets, which was just short of the record of $243 billion set in 2014. No other structured investment product came even close. In 2015 ETFs brought in more assets than mutual funds and hedge funds combined.Here are a few insights into the flows of 2015.

International ETFs took in nearly half of all assets. Of that half a large percentage was allocated to currency hedged products that are structured to minimize currency volatility.Three of the largest gainers being DBEF, HEZU, HEDJ.

Low cost and smart beta ETFs picked up considerable assets.We will discuss the smart beta ETF space in an upcoming monthly newsletter.

iShares beat Vanguard to take in the most cash.It is good to see them on top in terms of assets gathered in 2015 as they have continually driven innovation in the industry over the past decade.
529 and 401k Plans

In our next newsletter, we will look to cover the best strategies in regards to the two largest investment programs that the IRS allows investors to participate on a tax advantaged basis.These two programs being the 401k and 529 plans. Individuals and families have no greater need than to fund retirement and assist in college tuition.

One final note. Our goal for this newsletter is to keep it short in length and keep you informed on some of the ideas, products, knowledge and market experience that is the basis of the firm. Please provide any feedback you may have on this newsletter, and please feel free to contact us at any time.

Sign up for our free monthly newsletter below!

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Copper River Advisors – 2016 Market Outlook


Thank you for your interest in our 2016 Global Outlook. This should cover economic, geopolitical, and market topics in a more in-depth manner that what we would normally post in a newsletter, but we want to keep it interesting enough that we will get to the point without going overly verbose. I hope it is worthwhile reading.

Anyhow, here are some thoughts regarding where we have been and where we think we are headed in 2016…

2015 Highlights and Lowlights:

2015 was certainly difficult for investors as few, if any, asset classes produced significantly positive returns. Equities, Bonds, Emerging Markets, Energy, Commodities, Alternatives and Real Estate all struggled during the year, as fears of slowing growth in China, combined with OPEC flooding the market with oil and the Fed deciding to finally normalize interest rates, all created headwinds. Some of these events will have short lived impact on the markets and US economy, while others may take some time to work their way out.

Looking to 2016:

Economy and Federal Reserve
We still think the US economy is in recovery, as GDP, employment, and housing data are trending positive. With this in mind, the Federal Reserve should have no problem continuing its course of raising rates over the next few years to what would be considered a normalized rate environment. Note that since the economy is not to be considered robust, the Fed will move at a gradual pace, possibly with several pauses along its path.

US Stocks
Coming off a forgettable 2015, the US Equity market should face fits and starts over 2016. There will be opportunities, but generally, one should expect very modest returns over the year. Although the economy is in recovery, we still feel that equity markets may face headwinds from external forces, like emerging markets, commodities, etc. Nevertheless, stocks that are fundamentally sound with good earnings and dividend prospects should provide relatively stable, positive returns for investors. Extra diligence will be required while investing outside this space.

EU Stocks
Stocks in the EU are still stuck in an economy that is lagging behind that of the United States. The ECB still finds plenty of reasons to continue its accommodative policies. Nevertheless, European stocks have always put an emphasis on maintaining solid dividends. With this in mind, US investors can potentially benefit by utilizing currency hedged investment products.

With the Fed now in a tightening posture, we feel that bonds, bond funds, and bond ETFs will become more attractive over 2016. The caveat will be that we need to be attentive to duration (interest rate sensitivity) as well as credit risk. As rates increase, high yield products will see the highest pricing risk, as there will be pressure on these credits to yield more. Also, 20-30 year bonds of higher credit quality should underperform as they tend to be more interest rate sensitive. As mentioned before in this outlook, the pace of the Fed will be gradual, and that should allow many investment grade, intermediate term fixed income portfolios to perform well, as they will have time to adjust to Fed moves. And finally, preferred stocks, which behave like perpetual bonds, may be acceptable as long as the Fed moves slowly, as is expected.

With respect to China, I keep hearing – and agreeing with – the concept that the economy is struggling as it matures from a manufacturing focused economy to one that is more consumer oriented. It is fair to say that the US had faced similar issues in the 70’s and 80’s as it began to look for cheaper products from overseas. Expect to see continued economic and market volatility from this country. We will remain vigilant in assessing any sustained contagion risk for our clients. Looking at the rest of the emerging market space (Brazil, India, etc.), we think that although there is a lot of obvious downside risk (recession, inflation, political risk), there are still opportunities for growth in countries that effectively manage their respective economic situations.

At this point, it is difficult to be positive on the outlook for commodities, given the slowdown in manufacturing countries like China. There may be weather related plays available, but those will be trading opportunities, not well suited for the long term investor. Commodities typically are inversely correlated to equities and bonds, and therefore may provide further diversification for a given portfolio. We remain cognizant of this and will implement commodity strategies as appropriate.

I find this a very interesting asset class. OPEC decided to remove any production limits in order to drive prices down and force shale producers to the sidelines. Dominated by the Saudis, there are also reports that they are doing this to keep Iran from enjoying the fruits of a lifted trade embargo. As far as our clients are concerned, we are looking for a bottom in oil prices. At the time of this writing, WTI Crude is in the mid $30/Barrel range. There are opportunities here, but we do need to be patient. We wont be able to time the market but we do keep this asset class on the radar. We will also be monitoring complementary stocks, like airlines, which are quite sensitive to shifts in oil prices.

Real Estate
Domestic real estate valuations should continue to be relatively stable over 2016, given that the economy is doing the same, and bank lending standards have been stringent enough as to limit leverage to speculators. We have been witnessing some investment products take pricing hits in recent months as fears of rising rates have put downward pressure on valuations. These products tend to be interest rate sensitive and may be best watched from the sideline until the volatility calms down.

It appears that many alternative investment strategies have seen better days. Hedge fund returns have not generated returns worthy of the illiquidity and fees associated with them. But there are some areas we are looking at, such as peer to peer lending, which provide solid returns, diversification, and insulation from market noise. We are currently exploring this as an option for our clients, and are keeping an eye out for similar opportunities for our investors.

When you click on our website’s homepage, you see a headline that says “Lots of Rough Water Ahead.” That pretty much says what we have in front of us this year. 2016 will not be an easy year, but with a good, well thought out strategy, we can plot a course to navigate a path for our clients with a positive outcome.

We hope 2016 brings good results for all our clients.

Jim Etten
Dave Falicia

Federal Reserve Rate Hike

While the recent Federal Reserve rate hike of .25 basis points will bring some expected disruption to the markets over the coming weeks it will signal an overall positive move for the markets as well as the economy in that we are finally heading in the direction of normalizing U.S interest rates.

Linked below is a good executive summary from T. Rowe Price on the fixed income markets as we head into 2016 and a Federal Reserve tightening policy: https://www4.troweprice.com/gis/fai/us/en/insights/articles/2015/q4/global-fixed-income.html

Happy Birthday USMC

Last week marked the Marine Corps 240th Birthday, a day celebrated and with deep meaning for those that have served in the Marines. For those uninitiated to the service of the Corps to this country since 1775 and its history here are some basic facts. For those Marines out there that have stumbled across our site for financial information we say thanks and Semper Fi.



ETFs vs. Mutual Funds

Copper River Advisors recently attended Northern Trusts “Flexshares” conference in Chicago. The conference featured a number of great topics and speakers presented to a small group of independent RIA business owners.  The following white paper published by the Flexshares team does a great job presenting the differences that investors should understand when considering a mutual fund or an ETF as an investment vehicle.

Click here to read the Flexshares white paper

**Monthly Newsletter – October 2015**

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Firm Update[/x_custom_headline]

For the month of October the markets experienced a substantial positive uptick. The key equity benchmark, the S&P 500, notched an impressive 10.82% gain since our September newsletter release. However, the move was on the heels of a late summer downturn. Year to date, the S&P 500 has now turned positive with a 1.52% return for 2015. Please see Dave’s market commentary below for a further view of where we expect the markets to head for the final few months of 2015.

As we go into the end of the year we want to thank all of our clients that have come onboard in 2015 at CRA. It has been a good year for the firm. As a boutique investment advisory firm focused on high net worth clients and institutional accounts, we look to remain focused on each and every client position held. As a firm, we will always keep the client/advisor ratio low to meet our investors’ ever changing needs.

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Market Commentary[/x_custom_headline]

Dave Falicia

Equity markets have essentially recovered from the volatility experienced over the summer. The bond market has been relatively unchanged. This points to the fact that despite all the fears that came to a head over this period, the US economy remains relatively stable, and global risks are not as dire as the markets had initially indicated. We feel that the chances for a recessionary relapse are minimal, and clients will continue to be rewarded by staying invested over the long term in sectors and industry groups with solid potential for growth.

While volatility in the markets is difficult for our clients to watch, it is also important for us to understand that pricing fluctuations present a tremendous opportunity to dollar cost average into positions at a cheaper cost basis. As we head toward the end of the year, with an inevitable rate hike at some juncture, we expect to see more volatility and plan to use it to our clients’ advantage.

On the topic of interest rates, we feel that the economy is healthy enough that the FOMC should bring rates to more normalized levels. We have actually felt this for some time. Unfortunately, the Fed appears to have been looking for reasons to hold rates at historically low levels. One feels like the markets have developed a dependency on this interest rate environment but at some point the markets will have to disengage from this artificial stimulus. Even when the Fed does raise rates, it will be at a tempered pace. We expect that the bond market should be able to easily absorb the rate increases with out substantial detrimental impact. The economy is recovering, yet not at a pace that would require aggressive moves by the Fed. Therefore we would be surprised to see rates higher than 1.5% by the end of 2016. We continue to seek investment options that position our clients well given current and expected market conditions.

Feel free to contact us if you want more insight into markets – dave.falicia@crawealth.com.

[x_custom_headline type=”center” level=”h2″ looks_like=”h3″ accent=”true”]Product Commentary[/x_custom_headline]

Jim Etten

At CRA we continue to focus on building individual custom portfolios based on a client’s age, risk level, as well as liquidity needs. For the past few years this has been especially difficult for those investors nearing or in retirement due to the low rate environment. However, with the firm’s strong background in fixed income (specifically Dave who previously managed a large bond fund at Oppenheimer) and the continued expansion of exceptional new fixed income products in the market, we have found a number of areas in which relative value and returns can be obtained. Here are a few of the areas in the fixed income market that we will continue to focus on in this historic low rate environment.

Unconstrained Bond Funds

Unconstrained Bond Funds take a flexible approach to capturing global opportunities and managing risk. They strive to actively mitigate downside risk, provide attractive risk-adjusted returns and preserve the diversification benefits of a traditional fixed income portfolio. By removing benchmark constraints, these funds can gain significant latitude to tap into credit, interest rate, volatility and currency opportunities across global sectors and regions. One that we like and continue to invest in is BSIIX from BlackRock, the world’s largest money manager.

Bank Loan Funds

These funds buy loans made by banks and are usually secured by senior debt. Banks will often make loans to corporations who need to raise capital without issuing bonds to the street. The loans in these funds are typically BB and below, but credit quality is mitigated by the fact that the typical fund will have hundreds of unique issuers (diversification) and strong active managers. Another positive feature of this investment is that the loans in the fund are almost always floating rate, insulating the investor from changes in interest rates.

One bank loan fund that we like and continue to utilize is OOSAX or Oppenheimer Senior Floating Rate Fund. The fund has almost 400 unique issuers, total assets of 15 billion dollars, and has a portfolio team that aggressively monitors the loans within the portfolio. This fund has a 30 day yield of 4.47%, with a relatively low expense ratio. While the fund normally comes with a sales charge (which we typically despise), it is actually no-load on the Schwab advisor platform making it an attractive holding for many of our clients.

One final note. Our goal for this newsletter is to keep it short in length and keep you informed on some of the ideas, products, knowledge and market experience that is the basis of the firm. Please provide any feedback you may have on this newsletter, and please feel free to contact us at any time.

Sign up for our free monthly newsletter below!

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