Asset allocation in a low return world

The rules of asset allocation have changed. Two of the new imperatives:

• Using tactical asset allocation (TAA)
• Investing in real assets

These are among the best strategies for individual investors in an environment in which U.S. stocks are expected to average annual returns of 6%-7%. This is what I took away from "Asset Allocation in A Low Return World," a March 13 presentation to the Boston Security Analysts Society, by Adrian Cronje, vice president and director of asset allocation, Wilmington Trust.

Tactical asset allocation doesn't deserve its bad rap

Everyone says, "Don't try to time markets." But TAA is not market timing, said Cronje. "It is not about forecasting turning points." Instead, it is a form of rebalancing that can boost your returns.

You might think of rebalancing as buying and selling assets to return them to predetermined percentages. That's not what Cronje meant. He spoke instead about adjusting allocations to take advantage of changes in risk premiums.

"Dispersion among sub-asset class returns reflects risk premiums that are not stable, but cyclical," said Cronje. He talked about sub-asset classes because he looks at distinctions finer than large-cap vs. small-cap or growth vs. value. He'd prefer to invest in narrowly defined subsets, such as value as defined only in terms of book value or growth in terms of earnings.

Sub-asset class outperformance can be significant—what Cronje calls "large amplitude"—and last one to four years. That's often enough to justify the transaction and tax costs of TAA.

Cronje believes it's possible to identify when there has been a strategic shift in sub-asset class returns, so you can change your allocation once the new cycle is already under way. That's a lot better than suffering for getting in too early.

TAA can deliver returns that made Cronje say, "Beta is not always boring, cheap and alpha's unloved cousin."

Investing in real assets is essential for individual investors

"Today, traditional stocks and bonds just aren't good enough any more," said Cronje. Individuals should diversify into real assets and alternative assets. These are asset classes that can deliver real sustainable earnings power.

In one sense, real assets can be defined as physical or tangible assets. But more importantly, they're assets that offer a hedge against inflation. For example, inflation-linked bonds, real estate securities, and commodities. Since the debut of ETFs, these asset classes have become much more accessible to individuals.

A typical Wilmington Trust client might have 10%-15% in real assets. But they're a lot wealthier than your typical individual investor. Cronje didn't describe the profile of the individual investor who should consider these techniques. Presumably there's a minimum level of investable assets required.

Alternative assets—hedge funds, private equity, and private real estate—are also expected to outperform over the long term. They're not as accessible to individuals. In fact, even institutions must compete to invest with top performers. Although Cronje didn't discuss them, there are new investment vehicles—such as mutual funds that pursue long-short strategies—that alternative investments more accessible.

Cronje based these asset class recommendations on a long-term, inflation-adjusted forecast for returns. He called forecasts for periods of 10 years or more "highly reliable." Of course, he's not looking for accuracy down to decimal points. What's important is which asset classes will outstrip others, and in what order.

Follow Cronje's advice, and perhaps your portfolios will be better positioned for today's uncertain environment.

_________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

HSBC economist Stephen King says "Goodbye to all that"

The world that we took for granted is gone. No more rapid global growth. No more easy investment opportunities. No more excess liquidity.

That was the starting point for "Goodbye to all that," a Feb. 25 presentation to the Boston Security Analysts Society by Stephen King, chief economist and global head of economics for HSBC Group.

King, who's based in the U.K., brought a global perspective to the current housing and credit crunch in the U.S. "The U.S. housing crisis has become a transatlantic lenders' problem," he said. Why? Because in their quest for higher yields, institutional investors in the U.K and the eurozone became heavy investors in U.S. corporate bonds. By corporate bonds, he meant asset-backed securities, especially mortgage-backed securities. U.K. banks that have gotten burned are tightening their lending standards just like their U.S. counterparts.

King predicted that 2008's biggest negative surprise for financial markets might come from outside the U.S.: the sudden loss of momentum in the U.K. and elsewhere. In fact, he suggested that the U.S. dollar may appreciate in 2008 because economic risks are priced into the U.S. market, but not in Europe.

On the emerging market front, King said that those economies have decoupled from the U.S. "Slower G7 domestic demand growth may not be an emerging market disaster," according to him. But while some strategists stress the upside of emerging market demand for the U.S., King emphasized the downside. A slowly growing U.S. that's cutting interest rates will boost capital flows into emerging markets, where too much domestic demand will fuel inflation in fuel and food costs. That inflation will deliver another blow to the economies of developed nations.

________________
Susan B. Weiner, CFA
Investment Writing
Writing that's an investment in your success

Check out my website at www.InvestmentWriting.com or sign up for my free monthly e-newsletter.

Passive vs. active verbs: Following up BSAS Investment Commentary Class

Can you show me an example of passive vs. active verbs?

That question from a participant in my BSAS class on "How to Write Investment Commentary That People Will Read" sparked my decision to publish the article below from my Investment Writing e-newsletter.
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Sentences featuring active verbs typically have more oomph than their passive counterparts. You can also ratchet up your sentences' appeal by using colorful active verbs, such as "ratchet."

Here’s a quick test. Which of the following sentences uses an active verb?

1. The announcement of a peace treaty sparked a stock market rally
2. The stock market rally was caused by the announcement of a peace treaty.

Yes, it’s sentence number one. In sentence number two, the use of "was" -- a form of "to be" -- betrays the sentence’s passivity.

Still confused? Check out this explanation of active vs. passive verbs.

Scroll down to the fourth section, “Changing Passive to Active” for hints on how to purge your sentences of passivity.

I must thank Karyn Greenstreet’s Passion for Business e-newsletter for bringing this grammar web page to my attention.

I like this related tip from Richard H. Weiss' "How to be your own best editor,": "Use powerful verbs. Underline all the verbs in your copy. Did you find a bunch of 'is' and 'are' constructions? Can you replace those words with verbs that convey momentum and action?"

"How to Write Investment Commentary Your Clients Will Read," Sept. 24 BSAS program

You invest a lot of effort in writing your quarterly client letter or commentary. Wouldn't it be nice if your clients actually read it? Some simple, quick tips can spice up your commentary without landing you in trouble with your Compliance Department. "How to Write Investment Commentary Your Clients Will Read," an interactive program, will teach you to make your text reader-friendly without stripping it of meaty content.

Register for this program led by Susan Weiner, CFA on the Boston Security Analysts Society website. If you can't attend the September 24 program, contact Susan to present customized training at your company.

U.S. Secretary of Energy Samuel W. Bodman addresses BSAS

U.S. Secretary of Energy Samuel W. Bodman addressed the Annual Meeting of the Boston Security Analysts Society on Monday, June 25.

In his speech, Bodman said "pretty much what he was supposed to say." Or at least that was the consensus at the table where I sat.

Things got more interesting during the Q&A.

China, said Bodman, ignores environmental and energy policy in favor of economic growth. The Chinese government's big fear is that if it loses economic growth, then it will not be able to maintain order in their society. There's tension because of the big gap between the rich and the poor.

Bodman predicted it'll take three years to break ground on new nuclear plants in the U.S. and it'll be 2015 before those new plants are in working order.

In answer to a question about the high cost of sugar in the U.S. despite Brazil's cheaply produced sugar, Bodman said that's why cellulosic ethanol is being pursued. In answer to this question and others, he said that he doesn't try to take on things -- such sugar subsidies -- that he can't change.

van Agtmael: Put 20% of your portfolio in emerging markets

Your neutral benchmark for stocks should include a 20% allocation to emerging market stocks, said Antoine van Agtmael in his April 23 speech on "The Emerging Markets Century" to the Boston Security Analysts Society. Twenty percent is roughly the percentage of global market capitalization accounted for by emerging market stocks.

Van Agtmael, the chairman and chief investment officer of Emerging Markets Management, wouldn't stop at 20%. He recommends raising your allocation by 1% annually. Your benchmark should be dynamic, he said. However, after a series of good years, you should skip a year of raising your allocation. Speaking of good years, emerging markets have enjoyed a strong run recently. Accordingly, van Agtmael would currently recommend underweighting emerging markets in your portfolio.


Consider companies outside the top 200

Van Agtmael recommended that investment professionals consider companies other than only the 1,000 included in the indexes. He noted that 90% of investments in emerging market companies are made into the top 200 stocks. That's a small percentage of the 15,000 stocks listed around the world.

Investment managers should look at what made the current leaders among emerging markets great. They should seek those same characteristics in what's likely to become the next generation of market leaders. For van Agtmael, those characteristics include:

• Unconventional thinking about how to solve problems
• A truly global mindset
• An obsession with quality and execution

America no longer at the center

From a broader perspective, van Agtmael said that Americans need to lose their perception that we're the center of the economic universe. This is less and less true. Moreover, we are now in the midst of the biggest and greatest shift in the global economy and power since the Industrial Revolution. In some sense, it's a return to the world before the Industrial Revolution, when China and India were the world's largest economies, he said.


Van Agtmael's new book


Van Agtmael recently published The Emerging Markets Century: How a New Breed of World-Class Company is Overtaking the World.

How many of your clients will defect...

... if your wealth management firm is sold?

On average only 1.5% of revenue-generating clients defect in wealth management deals, according to Elizabeth Nesvold of Cambridge International Partners, an M&A advisory firm. Nesvold spoke about "Evolution (or Revolution?) of the Wealth Management Industry" to the Boston Security Analysts Society on April 2, 2007.

Nesvold said she could only think of one high net worth deal where client defections were so bad that they triggered a modest decline in a firm's purchase price.

Accounting "Principles vs. Rules and Fair vs. Unfair Values"

Wonder of wonders -- I've heard a humorous presentation about accounting!

The topic was "Principles vs. Rules and Fair vs. Unfair Values," delivered by Professor G. Peter Wilson of Boston College to the Boston Security Analysts Society on Feb. 8, 2007.

I was struck by Wilson's conclusion that "we'll have more new [accounting] principles and five times as many new [accounting] rules five years from now."

Wilson believes that accounting requires both principles and rules in a well-arranged hierarchy from broad principles down to more specific rules. "You often need rules to help you follow principles," he said. However, "the most effective control is people wanting to do right."

FactSet: Add risk-based performance attribution for more meaningful analysis

Traditional weight-based performance attribution can be deceiving, said FactSet's Chris Ellis in his January 30 presentation on "Effectively Connecting Portfolio Risk and Excess Return" to the Boston Security Analysts Society. Ellis is FactSet's director of portfolio analytics and a senior vice president.

Ellis started with the assumption that the portfolio manager's goal is to outperform the benchmark on a risk-adjusted basis. Traditional performance attribution doesn't analyze whether active risks contributed to active performance.

Ellis suggested adding factor reports to link active risks and active performance. That's the best way to figure out what's driving relative performance.

Outlook for emerging market bonds

“Emerging Market Bonds: Are You Being Paid for Risk?” was the subject of a Boston Security Analysts Society panel moderated by William L. Nemerever, partner and co-manager, global fixed income group, Grantham, Mayo, van Otterloo & Co. on January 23.

Their bottom line: Emerging market (EM) bonds are fairly valued and their near-term outlook is excellent. Years ago EM bonds used to be considered risky, even speculative. That has changed. Now they’re just another part of the global bond universe, said David W. Rolley, co-head of global fixed income, Loomis Sayles & Co.

During the past couple years, EM spreads have tightened and even become tighter than corporate bonds with similar ratings, said John Peta, portfolio manager, emerging market strategies, Standish Mellon Asset Management. Why? He cited factors including:

· Improved credit ratings

· Broader investor base due to strategic inflows and local investors

· Less vulnerability due to abandonment of fixed exchange rates

Rolley played up the role of 28 years of 10% GDP growth in reducing the volatility of the EMBI Global index. But low volatility can’t persist forever. “Volatility is too low. EM governments will provide it themselves by misbehaving,” he said.

Citigroup’s Don Hanna, managing director, head of emerging market economic and market analysis, identified three trends keeping EM bond spreads tight:

· Globalization

· Financial innovation

· Better government policies

Risks loom in each of these sectors over the longer term.

The downside to the greater stability of EM bonds is they don’t offer as much portfolio diversification as in their more volatile days. Perhaps the last stronghold of diversification lies in local currency EM bonds, suggested Rolley.

P.S. When I subsequently discussed this presentation with some BSAS members over lunch, they were concerned that it didn't spend much time on the risks from the carry trade or the fact that investors are not being well-compensated to take on risk. What do you think?

Are advisors doing all they can for their clients' philanthropy?

Are financial advisors missing the boat on philanthropy?

That's the assertion of "When Cups Runneth Over: For those who have an abundance, the private foundation has come into its own" by Ellen Uzelac in Wealth Manager (January 2007). Free registration may be required to read the article.

Here's how Uzelac puts it: "Most wealth advisors find themselves poorly positioned when it comes to one of their high-net-worth clients’ most worthwhile impulses—the impulse to give money away. With $500 billion in assets sitting in private foundations today, the disconnect seems almost absurd. Yet few wealth managers treat philanthropy as a core competency, and many are uncomfortable even bringing the subject up."

The article offers suggestions for advisors who'd like to delve deeper into philanthropy. The Bank of America philanthropy study Uzelac refers to is available online.

Advisors in greater Boston can register for "What Do Clients Want? How Can You Help? The Professional Advisor’s Role in Philanthropic Planning," the topic of a Boston Security Analysts Society (BSAS) lunch meeting on February 13. The speaker, Stephen P. Johnson, vice president of The Philanthropic Initiative, Inc., got good reviews when he spoke at the BSAS Wealth Management Conference in October 2006.

In the interests of full disclosure, I have an interest in promoting this BSAS lunch because I'm the co-chair of the committee that scheduled it. Also, I read Wealth Manager because I occasionally write for it.

New hedge fund regulations proposed in December 2006

After the SEC's court defeat on hedge fund registration, sources told me that wouldn't end the Commission's efforts to regulate hedge funds.

They were right. The SEC proposed new regulations late in December 2006. They focus on tightening the requirements for status as a qualified investor and protecting the interests of hedge fund investors against fraud, according to a presentation to the Boston Security Analysts Society by George J. Mazin, partner in the law firm of Dechert LLP.

The SEC would tighten the definition of an accredited investor, known in technical terms as an "Accredited Natural Person." The biggest difference between old and new definitions is the requirement for the investor to hold $2.5 million in investments. But there are other, more minor tweaks.

The new definition will impact hedge fund sales and marketing, said Mazin. Likely implications include:

• Organization of fewer 3(c)1 funds
• Conversion or dissolution of existing funds
• End to some existing investors' ability to invest more in hedge funds
• Possible creation of a market for registered fund of funds products
• Disadvantaging of smaller institutions

The SEC's other new regulatory thrust was expressed in anti-fraud Rule 206(4)-8 to make it illegal for hedge funds to engage in business practices that are fraudulent, deceptive or manipulative toward current or prospective investors.

The comment period for the proposed regulation ends March 9. Mazin anticipates the regulations will be issued and take effect in late March or early April, assuming no major issues surface during the comment period.

The new regulations aren't the only regulatory issues for hedge funds to worry about. Mazin also discussed side letters and side pocketing.

To stay current on hedge fund regulation, Mazin recommended Hedgewire Daily News, Hedgeweek, and Alternative Investment News. I noticed at the bottom of his bio, that he frequently lectures or publishes on hedge funds and other securities topics.

Notes from a Private Wealth Management conference

Here are some random notes from the Boston Security Analysts Society's Wealth Management Conference in October 2006. I focused on some tidbits that might interest you. They're only a tiny fraction of the interesting information presented at the conference.

How to justify investing in commodity futures
Interested in getting your clients to invest in commodities futures?

"Facts and Fantasies About Commodity Futures" by Gary Gorton and Geert Rouwenhorst, NBER Working Paper No. 10595 is the classic on this topic, according to Kevin Rich, director, currencies and commodities complex risk group, Deutsche Bank and CEO, DB Commodity Services.

Here's a quote from the NBER Digest discussing the paper. "In Facts and Fantasies About Commodity Futures (NBER Working Paper No. 10595), co-authors Gary Gorton and Geert Rouwenhorst show that over a 45-year period a diversified investment in collateralized commodity futures has earned historical returns that are comparable to stocks. That reward, rather than foreseeable trends in commodity prices, is the key to the returns that a futures investor can expect. Individual commodities can be very volatile, but much of this volatility can be avoided by investing in a diversified index of commodities."

I'd give you a link to the actual working paper, but the NBER website appears to be out of order as I write.


Hedge funds and the private client
These are good reasons for private clients to invest in hedge funds, according to David Shukis, managing director, hedge fund research, Cambridge Associates:

• Capital preservation
• Low volatility*
• Diversification of return sources in overall portfolio
• Hedge versus risk inherent in large single holdings

* Lowering volatility is the best reason to invest in hedge funds, said Shukis.

Bad reasons for private clients to invest in hedge funds:

• Return enhancement vs. equities
• Everyone else is doing it

Life insurance as an asset class

Life insurance makes sense as an asset class for clients with a median net worth of $50 million to $80 million, according to David Freely, president, Financial Architects Partners. Below that level of assets, clients use insurance to finance specific needs.

"Uncle Sam's subsidy is a huge advantage," said Freely. That makes it possible to use insurance to get a better return with less risk than on bonds.

Louise Yamada: Financial markets becoming less Ameri-centric

The U.S. is becoming less important as a driver of global market performance.

That's according to Louise Yamada, managing director, Louise Yamada Technical Research Advisors. Yamada, a 24-year veteran of technical research at Smith Barney (Citigroup), spoke on "The Evolution of New Structural Trends" to the Boston Security Analysts Society on October 5.

Why the shift away from the U.S.?

Yamada identified some key developments:

• Rising global liquidity
• Chinese exports exceeding those of the U.S.
• U.S. becoming a smaller piece of global GDP
  

We may experience a shift to non-U.S. markets outperforming the U.S., said Yamada. However, if you pick the right stocks in the U.S., you may do well. That'll probably require investing in companies with innovative technology, she said.

Some other arguments made by Yamada:

• The bull market in bonds is ending, but interest rates could be in a trading range for awhile
• Gold is in a bull market, though it'll fluctuate sideways before rising
• Oil prices may never return to their old lows
• Inflation may be shifting from heavy industrials to consumer essentials (food, water, energy)
  

"Structuring Venture Capital Funds" by Gunderson Detmer speakers

IPOs aren't as popular as they used to be as an exit strategy for venture capital. Instead, the companies that they invest in are being snapped up by strategic buyers or financial buyers.

Why?

It's the influence of the Sarbanes-Oxley Act, according to Jay Hachigian of the law firm Gunderson Dettmer Stough Villeneuve Franklin & Hachigian. Public companies have to deal with too many regulations. Hachigian spoke on "Structuring Venture Capital Funds" with Nick Guttilla, his colleague, at the Boston Security Analysts Society on September 21.

The other fact from this presentation that captured my attention is that total venture capital investments are finally trending up again after peaking dramatically at $104 billion in 2000. In 2006, that number will recover to only $25 billion, according to Hachigian's graph.

Montreal vs. Boston: Which market outlook dinner is better?

I attended my first market outlook dinner in Montreal on June 8, sponsored by the Montreal CFA Society. As I shmoozed before the meal, another Bostonian said "I've heard that Montreal's market outlook blows Boston's out of the water." Technically speaking, Montreal has an "annual forecast" dinner, while Boston has a "market outlook" dinner.

Here are my thoughts on that topic:

Montreal beats Boston on glitz and laughs
A robust sound system blared recorded music. My favorite musical moment came when bagpipes announced the arrival of Moderator Martin Barnes, Managing Editor of The Bank Credit Analyst.

Four oversized video screens shot pictures of the podium to the back of the room, which was packed with more than 600 attendees. The Society used the video screens to display video highlights from the previous year's dinner. Naturally, they highlighted the 2005 predictions farthest off the mark. It appeared that nobody foresaw the robust upward moves in Canadian stocks or gold.

Of course, it's easy to take potshots at one-year predictions. Dear readers, have any of you been consistently right in your predictions? Don't you have at least one year-old prediction that folks could laugh at?

Between the video highlights and Barnes' sense of humor -- which Bostonians didn't experience fully when he spoke at our Market Outlook dinner -- Montreal beats Boston on laughs as well as glitz.

Do I understand the reasoning behind the speaker(s)' predictions?
Boston wins on this score. Why? Because each speaker gets a good chunk of time to describe his or her market outlook and the reasoning that underpins it.

Montreal's market outlook is conducted as a question & answer session. The same question is directed to each speaker in rapid succession. I had to pull together their rationales on my own. In addition to moderator Martin Barnes, there were four speakers representing different geographic regions.


Good food
Sorry, Montreal.

My very subjective judgement is that Boston's Ritz-Carlton beats the Queen Elizabeth on market outlook dinner food. My beef at the Ritz was cooked to perfection, whereas it was overdone at the Queen E.

Ben Stein gives heartfelt speech on ethics to Boston Security Analysts Society

Aside from a few jokes, I wasn't sure what to expect from a keynote speech to the Boston Security Analysts Society (BSAS) by Ben Stein, who was billed as an author, actor, lawyer, humorist, and observer. Stein is best-known for his role in the movie Ferris Bueller's Day Off.

He surprised my modest expectations by delivering a heartfelt speech about ethics in American business. He focused on a case study -- the example of Richard Kinder of Kinder Morgan attempting to take the firm private.

This is not a philanthropic act, said Stein. Why would Kinder try to buy the firm unless he knows he's underpaying for Kinder Morgan's assets? There's a problem: As chairman and CEO, Kinder has an ethical duty to shareholders to put their interests first. But a management buyout, by definition, must put management first. Indeed, management got fantastically rich in every buyout that Stein covered back when he wrote for Barron's.

Stein draws these lessons from management buyouts:

1. It'll be possible to make real money by arbitraging this deal
2. There's a fantastic amount of value to be derived from controlling both sides of a deal, although it's unethical
3. Superior knowledge is a great thing, whether it's acquired ethically or not

Stein also spoke about his work with the Tragedy Assistance Program for Survivors, which he wrote about recently for American Spectator. He concluded his speech by urging BSAS members to help make more secure the lives of widows and others left behind by the war on terrorism.

Biggest challenge for NYSE's Marshall Carter

Marshall N. Carter, Chairman, NYSE Group, Inc., addressed the Boston Security Analysts Society (BSAS) on Thursday, May 11. He discussed the changes brought on by the merger of the New York Stock Exchange with Archipelago and the impact of increasingly electronic and global stock trading.

During the Q&A, I asked Carter what's his greatest challenge going forward.

His reply? What happens if revenues from the NYSE's three sources -- listings, trading and market data -- really takes off? The NYSE's customers could complain that those revenues are "coming out of their hides." There are issues of how the NYSE, as a nonprofit organization recently turned into a for-profit organization, can maintain the public's trust.

In his presentation, Carter alluded to his recent testimony before a House Financial Services subcommittee. He's got some interesting stats about the declining number of IPOs listed in the U.S.

In case you're not familiar with Carter's background, here's what his blurb said, "Prior to serving as a director of NYSE, Mr. Carter lectured on leadership and management at the Sloan School of Management at M.I.T. and Harvard’s Kennedy School of Government. At Harvard, from 2001 to 2005, he was a Fellow at the Center for Public Leadership and the Center for Business and Government. From 1992-2001 Mr. Carter was chairman and CEO of the State Street Bank and Trust Co., and its holding company, State Street Corporation.

"Options for enhancing returns" by Bud Haslett of Write Capital Management

One of the most exciting moments of his life was when the Chicago Board Options Exchange introduced its S&P 500 BuyWrite Index (BXM) on April 11, 2002.

That was according to Bud Haslett of Write Capital Management, when he addressed the Boston Security Analysts Society on "Options for Enhancing Returns" on April 24, 2006.

A covered call strategy using the BXM would have produced returns similar to the S&P 500 with one-third less risk (as measured by standard deviation) over the period June 1, 1988 to December 30, 2005, said Haslett. Of course, this is a good time to remember that "past performance is not a guarantee of future returns."

Haslett emphasized that there are pros and cons to every investment strategy using options. Even a so-called "no-cash collar," where you'd receive $1 for writing a call and pay $1 for a put isn't without costs, he said. In that case you're sacrificing upside return potential on the stock.

Ed Haldeman: Putnam is not up for sale

What are your thoughts about the assertion that you're cleaning up Putnam for sale to another asset management company?

That's the question I asked Ed Haldeman of Putnam Investments during the Q&A portion of his presentation today to the Boston Security Analysts Society.

We're cleaning up Putnam for us, replied Haldeman, adding that the firm has worked hard to broaden employees' ownership of the firm. Stock is given to employees at a 30% discount to the appraised value.

"I wish every employee at Putnam could own stock," said Haldeman. But the restrictions of private equity prevent that. Putnam is 15%-owned by employees, the remainder is owned by Marsh & McLennan (MMC).

Haldeman said that:

• MMC is a very satisfied owner
• The relationship of Putnam and its management with MMC is very positive
• There is geographic separation between Putnam in Boston and MMC senior management in New York City
  

However, Haldeman also said, "My responsibility is to make sure Putnam is strong irrespective of ownership." He added that Putnam is in a strong financial position with a strong management team.

The main points of Haldeman's formal presentation focused on how the firm has managed change during his roughly two years on the job. That included:

1. Create a vision or mission: "What we do is take care of other people's money" instead of "we sell mutual funds"
   
2. Create a culture
3. Create an agenda: "Manage money for clients in a way that's consistent, dependable and superior"
   
4. Spend time outside my office
5. Get a few quick wins