**Monthly Newsletter – End of 2016**


Firm Update
-Jim Etten

As we head into the final days of 2016, we hope everyone had a great year and reason to celebrate. For those that had a difficult 2016, we hope that 2017 brings better opportunities and a new outlook for the year ahead.

For our firm 2016 was a year of growth and a year to prepare for more changes to come. Starting in 2017 we have two advisors joining the firm, both whom bring considerable experience,knowledge as well as adding a diverse investor base to the firm. Please see “Welcome Scott and Bob below”. In addition to Bob and Scott joining in 2017, the firm will split into into two different entities to address its client base and growth.

Copper River Advisors (CRA) will remain as is and focused exclusively on exceptional portfolio construction for high net worth individuals and families.

Copper River Institutional ( CRI ) will become registered and fully operational the first quarter of 2017 and will be focused solely on advising large corporations and institional investors on investment solutions in the global fixed income markets. Given Dave’s, Scott’s as well as my own experience in the space we will pick up with our decades of institutional knowledge and we look forward to working with many of our former institutional clients.

The addition of this business will not take away from the high net worth side but will only enhance it. We will be diligently working in the bond space, identifying leading managers, product structures and best practices in an adjusting interest rate environment.

Both CRI and CRA will advise and operate in a fiduciary capacity, always ensuring that a clients needs always comes first.

Welcome Bob and Scott

Bob Brown

Brings more than twenty-five years of experience in fixed income, custody, credit and risk management working in the New York City offices of Swiss Bank Corporation, Credit Lyonnais, Security Pacific National Trust and Bank of America. Bob will be responsible for clients that reside on the East Coast and assist the firm’s presence in the Eastern region.

  • B.S. in Business Administration/Finance at the University of Colorado, Boulder
  • M.B.A. in Finance & International Business at the New York University Leonard Stern School of Business
  • Uniform Investment Advisor Designation

Bob Resides in Manhattan and is an avid mountaineer and skier.

Scott Fox

Has 18 years of institutional market experience, having worked for Wall Street sell-side firms as well as buy-side money managers. Scott has over 10 years’ experience consulting Fortune 500 corporations, hedge funds and some of the world’s largest insurance companies on their investment portfolios. We are excited about the unique relationships Scott brings to the firm. Scott will be focused on building out the firm’s institutional product offerings and advising large global clients on their fixed income investments.

  • B.S. in Business Administration from Auburn University

Scott resides in Steamboat Springs with his family. He is an avid mountain biker, snow boarder and kids coach.

Market Update
-Dave Falicia

We started 2016 with a fair amount of pessimism in the markets, but it is now ending with most of that pessimism a distant memory. Economic data now consistently depicts an economy that is on good footing, and the Federal Reserve in turn, has finally decided it is safe to begin normalizing interest rates. We leave 2016 with the stock market at record levels, and interest rates climbing back to historical norms.

Going forward, we don’t think the current bull run will be without a few setbacks. We expect the market euphoria associated with the incoming administration to wear off at some point after the inauguration, after which we will begin to see whether there is long term growth associated with it. Because of this, we expect to balance our overall opinion of domestic and global financial markets with the uncertainty the new administration brings. This will most certainly result in opportunities for our clients, of which we will look to take advantage. The first quarter of 2017 will have us focusing on those opportunities and aligning our strategy for the remaining three quarters of 2017.

Sector and Industry Update
-Jim Etten

This year brought investors a much needed boost after a somewhat sideways 2014 and 2015. Certainly, various sectors and industry groups performed well in those years, but 2016 was a bit different in that a rising tide lifted almost all boats.

The S&P 500 YTD stands at +9.0% in 2016. Of the 11 major sectors that comprise of the index all but two were positive for the year.Only Healthcare and Real Estate stood out as having negative returns. The Healthcare sector is troubled by uncertainty coming from policy decisions in Washington, and Real Estate or REIT sector plagued by a rising interest rate environment. That said, both sectors have extremely strong 3 year performance numbers and at some point will be attractive to overweight on value.

Sector Sector View
Share of the
S&P 500 Index
YTD total return
Consumer discretionary Marketperform 12% 6.87%
Consumer staples Marketperform 9% 2.57%
Energy Marketperform 7% 26.28%
Financials Outperform 15% 21.57%
Health care Marketperform 14% -3.75%
Industrials Marketperform 10% 19.27%
Information technology Outperform 21% 11.36%
Materials Marketperform 3% 17.65%
Real estate Marketperform 3% -3.03%
Telecom Underperform 3% 15.83%
Utilities Underperform 3% 10.80%
S&P 500®  Index (Large Cap) 10.48%

At CRA we look for value and trends when investing in sectors and certain industry groups. We execute holdings for our clients through ETF’s, which provide us with a low cost tactical tool to sector rotate and re-balance a portfolio. A few ETF’s that we are overweight going into 2017 are:

SDIV- High Dividend Tilt
IYJ- U.S Industrials
GUNR- Global Commodity

On a final note, I would be remiss without mentioning the largest market in the world, the global bond market. 2016 was a year to remember, as the Federal Reserve finally tightened, moving off their near zero policy and towards an outlook for 2-3 incremental .25 basis point tightening’s in 2017. We could cover a 100 pages on analysis of fixed income in 2016, and what lies ahead, but no one would want to read that. What’s important is yields are climbing higher, very attractive to most all investors as fixed income plays such a critical part of an overall portfolio.

That said, the steep move in the yield curve, specifically in the 10 year treasury bond over last 45 days, has sent bond prices falling. For example (TLT) or the 20 year U.S treasury bond ETF is down -13% in the last 3 months. In the second half of 2016 the year the bond market performed extremely poorly in almost all its categories.

In summary to keep this short, clients are wise to be short on duration and overweight in higher credit quality as we go thru this unprecedented transition. In the long run higher rates will bode well for almost all bond investor, but patience is needed as it will take some time for rates to reach their historical normal range. The good news is the transition has started.

Thanks for reading our quarterly newsletter, and we wish everyone a Happy New Year!

Jim, Dave, Bob, Scott

Recommended Posts