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The New Wave of Financial Advisors
My guest on Hedge Fund Radio this week is Lee O’Dwyer, a portfolio manager at 5T Wealth Management in the sunny climes of Napa, California. Lee is at the vanguard of a new wave of financial advisors sweeping the nation that is leading the way for individual investors during these difficult times, when everyone is seeking the “new normal”. O’Dwyer is cherry picking for his clients the best money management techniques that have evolved over the last 30 years, and discarding the dross.
5T Wealth Management is offering sophisticated hedge fund management trading and risk control techniques, that until now, have only been available to the big boys, and making them available to the retail investor. Their goal is to achieve absolute returns at all times and strive for every trade to be profitable. Relative performance benchmarked to an arbitrary index, such as the S&P 500, has been consigned to the dustbin of history. We are all traders now, whether we realize it or not. Buy and hold is dead. Unlike your past broker, Lee does not expect you to pay him a big bonus and take him out to lunch because he lost only 10% when an index dropped 20%.
To avail yourself of O’Dwyer’s considerable talents you need only open a custody account at a major house like Fidelity, Goldman Sachs, or Morgan Stanley. You then sign a third person limited power of attorney that enables 5T to execute trades on your behalf, but not withdraw any funds. As you can log into your account online at anytime, transparency is total and complete. The positions are there in all their glory for you to view and analyze at any time, for better or for worse. There are no black boxes, homemade account statements, or a “need to know” basis. The arrangement gives many individual investors all the security they deserve in the wake of the ugliness thrown up by the unfortunate Madoff affair.
For all of this, Lee charges the 1% management fee and the 20% performance bonus that is standard in the hedge fund community. A “high watermark” means that bonuses are only paid out on new net increases in asset values. This makes double dipping in a volatile market impossible. SEC rules limit 5T to accepting only accounts with a minimum size of $750,000 from investors with $1.5 million in liquid assets. The new financial reform act will stair step annual income requirements from $200,000 a year now, to $300,000 and $400,000 down the road.
Lee employs a global long/short macro strategy that scours the world for only the cream of investment opportunities. Long term, he likes commodities (CU), food (DBA), (CORN), water (PHO), other resource plays, and precious metals (GLD), (SLV). He is enamored with the currencies of the commodity producing countries like Canada (FXC) and Australia (FXA). He is very bullish on emerging markets, like the BRIC’s, as well as other new entrants such as Indonesia (IDX), Turkey (TUR), Chile (ECH), and Poland (EPOL).
On the short side, he is adamant that the 30 year Treasury bond (TBT) is reaching the end of an epochal bubble. Lee also thinks that rapidly deteriorating fundamentals and a coming demographic nightmare demand that the Japanese yen (YCS) is headed for a generational fall. In the US O’Dwyer likes technology, energy, and commodity plays, but doesn’t expect much from the main indexes for the coming decade.
Lee hales from England where he obtained a degrees from the University of Wales, focusing on international relations, economics, and accounting. He immigrated to the US in 1993 where he joined a major US hedge fund, learning every corner of the alternative investment business from the ground up. In 2007, he moved on to 5T Wealth Management, an SEC registered investment advisor based just outside San Francisco. During the 2008 financial crisis, Lee limited his maximum draw down to 15% when the S&P 500 crashed 58%. He quickly earned back losses during the rebound that followed, much to the delight of his investors.
As a result, 5T Wealth Management is rapidly attracting new investors, and today boasts $110 million in assets under management. You can learn more about Lee O’Dwyer and 5T Wealth Management by visiting his website at http://www.5twealth.com/ . To listen to my interview with Lee O’Dwyer in full on Hedge Fund Radio, and to gain a glimpse into the future of retail asset management, please click on this link at http://www.madhedgefundtrader.com/september-2-2010-lee-odwyer.html and hit the “PLAY” arrow.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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"On the short side, he is adamant that the 30 year Treasury bond (TBT) is reaching the end of an epochal bubble."
You mean TLT? Or are you just talking about yourself again?
NO DISCLOSURE are you getting to paid to write that stupid post ?
alx
another idiotic post #sophisticated hedge fund management trading and risk control techniques, that until now, have only been available to the big boys
sure all those BIG BOYS at BS AIG Lehman used 'sophisticated' tools..
what a jerk..
alx
A quick perusal of this portfolio manager's website reveals five out of six of their strategies are down for the year. Only the income portfolio is up, and that 1.7% annualized. Not too excited yet.
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MHFT,
You have posted his fees and he sounds like an honest bloke. What has been his actual return to his investors over the last two years? Is that 20% an annual fee?
on the long term proceeds from his customer's original deposit?
Or is he collecting his fee on a yearly basis. Holding his losses to 15% was pretty good considering that TIAA CREF was down 37% at the max.
I am just a recreationally working retired engineer who has benefited from a good education but I have done as well as TIAA CREF since I "fired" Brandis near the 08 low and have done better than Alliance Bernstein where I have a small IRA kept to serve as my "thermometer".
In other words, has this individual done better for his clients than holding gold.silver or an intelligent selection of equities?
What has he really returned to his customers?
To i.pagnottella,
So you are an italian investment indipendent advisor, seeking for advertising on ZH. Why don't you give us a taste of your skills?
In this post O’Dwyer talks about a bounch of very intersting etfs like gld, slv fxc, fxa, tbt, ycs.
1) How would you play these on italian stockmarket, given that they're "etf non armonizzati". How do you cope with fiscal issues? And if you would buy them however, how do you hedge currency risk? (the bull in usd index will not last forever)
2) Is there an alternative to hui on milan stock exchange ? (maybe auco.mi)
And an alternative to fxf? Personally I use a multicurrency account on an italian online bank.
And to get long exposure on yen would you buy yen denominated bonds (what to consider about issuer risk and liquidity risk?)
And to get long exposure on braz real? I haven’t found nothing on MOT
3) Are you aligned with ZH people on skepticism about gld and slv etc?
4) Is there in Italy an alternative to vix etf?
5) Is there in Italy an alternative to tbt? Don’t you think that tbt is however a still early play?
In the past I’ve bought Italian independent investment advice but it was quite delusional. E.Benetazzo for instance is great in addressing the symptoms of financial malaise... but if you ask him financial advice, in his conventions he gives you only a review of investments like those I mentioned, without indications about timing and different scenarios that could happen. Further I’m puzzled about the fact that his own capital is invested in complete different way (venture capital).
Finally, I’m only curious,
What is your church?
A che parrocchia appartieni? ;-)
I'm in a rural area in the South and me and my two partners manage over 200MM. This guys is a genius and has 100MM under management and no ability to custody the assets?
And yes, every advisor (us included) is running absolute return at the core and democratizing hedge fund, managed futures and arbitrage strategies...nothing new here. Just tired of buy and pray...
I could provide this guy a nice job for 60K per year supporting my team, but my intern is free, probably smarter, and better on a Bloomberg!
Hey! That's my goal too!
So How are these folks any different from the thousands of other non-wirehouse independent Series 7/63/65 RIA's out there living off other peoples' savings? They must be sending you some mad hedge fund money to move around, or vice versa. Only $100 million in assets under management in the whole office with three producers is not much. Min account size is average $500 mil, or that's what they start out with. Sweet. Where's my phone.
If you left US stocks ten years or so ago as they were sliding you probably had a pretty good ten investment years.
Nothing that I can't do on my own and save the 20% and 0.4% of the management fee. You guys need to start looking for real jobs. The 20% fee is a rip off unless you hit a home run like betting on the death of subprime a la Paulson/Burry. As soon as these pension fund managers are all fired for incompetence, you people are going to be in a world of hurt.
I've heard customer mentality lately is more likely to pay big fees to be in the mkt with very limited or no downside and capped upside. That opens the door for a boatload of fee-based crap but it reflects customer sentiment. What happened to taking a small % and looking out for your customers....
1 pc on base, 20pc on profits and don't forget commissions. Why not show 2008 and 2009 performance figures? Guess not.
Is he your new son in law?
nice one...thanks for sharing, most "wealth" managers for people that are not truly are rubbish. Pawning off thier sell side crap.
1% and 20% still seems a little rich. I would be a real believer if he only charged a 20% high water mark, plus a small mark up on transaction fees.
Inquiring minds would like disclosure of the relationship between the author and his subject. Specifically, does madhedgefundtrader receive compensation for this? A well-placed advert, a first for zerohedge.
They probably share the same book (outlook), momentum baby!
Sounds like a ponzi'ist to me... that's the word for someone who manages ponzi scheme's. I'm sure there are plenty of people still stupid enough to put their money in someone elses hands though.
New Wave of Financial Advisors:
Daytraders
Ridiculous! What do these guys know about the market these days that a common man does not? It is all pretty random. This is like having somebody bet for you at the casino, taking 20% of the profits if win, but nothing if lose. Totally asymmetric!
These guys will keep making bets for you until they do win something, or the money blows up. Hardly a plesant choice!
If these guys bought some over the counter stuff with better arb opportunities, that would be one thing. But now they will trade for you what is available for everyone. So you could just buy some high yield stocks, and sit tight, no fees of any kind.
This could have been written in 1989....
What would truly be an "honest approach" is for the manager to be the largest investor...and suffer the losses as well when they occur....
BUY and HOLD is also dead for the typical RETAIL nonaccredited as well....
And I would suspect that THEY would enjoy having a good manager as well.....
The SEC and THEIR rules have become antiquated and basically useless....
....................................
What really should be happening in the "Internet Age" is for the market to be set up for RETAIL.....and banks should only be allowed to service RETAIL not game them via captured government workers....
Now that the BATS type system has proven itself....the exchange is just basically software.....and can/should be located in the best served domain....ie Switzerland...perhaps a less "reg captured" place to operate and serve the public....
What would make for a better marketplace....a handful of large accounts with the honesty of a Cramer....or two billion RETAIL accounts worldwide ....pressing their own computer buttons.....
The whole system needs to hit the reset button ....and be re-prepped for RETAIL.....
totally agree, well said.
Their goal is to achieve absolute returns at all times and strive for every trade to be profitable.
Yeah, and my goal is to have a convertible and a different blond in the passenger seat every day of the week.
In ZIRP-world there are no strategies that produce stable, absolute returns at all times, certainly not anything that can be rolled out at the retail level.
If there is any lesson to be learned from this past era, other than there is no free lunch, it's that the most conservative investment strategies with strong potential upside happen to also be contrary to the predispositions of human nature - such as Taleb's =<95% safety/=>5% long-shot insurance/options strategy where you just break even or loose a bit of money most of the time, year after year. And that will never fly retail.
Oops! The Taleb-esque strategy is approx. 95% or more of investable assets parked in max safety and 5% or less in low probability/high impact insurance/options.
The math/grammar of my original sentence doesn't express that correctly. Hadn't had my third cup of coffee yet. Sorry.
+100 on a scale of 0 to 10.
i do the exact same work here in Italy as an independent fee only investment advisors, if you publicize him you should publicize all of us, there are lots of good advisors around, but they are not famous, because they are honest. In Italy seems that the newspapers dont want to talk about us much, irritates the financial industry