Investment consultants will meet to ponder asset allocation strategies

(May 27, 2003) The Canadian chapter of the Investment Management Consultants Association (IMCA) is holding its annual two-day continuing education conference in Toronto on June 11 and 12. The theme this year, says conference organizer James Wanstall, vice-president of sales at Abria Financial Group, is adapting Modern Portfolio Theory (MPT) to an environment that has confounded traditional asset allocation assumptions.

Does MPT work? The short answer, says Wanstall, is yes. However, investment managers have limited their field of possible investments, particularly through the long bull market, he adds, to long-only investments, diversified by market capitalization and the value and growth styles, with a bit of fixed income. The IMCA conference will broaden out the standard asset allocation process to consider investments that can complement the traditional cash, bond and stock portfolio, with two sessions on hedge funds.

IMCA has a relatively small profile in Canada, but its list of members includes names long familiar with investment advisors, including tax authority Kurt Rosentreter and exchange traded funds guru Howard Atkinson. IMCA is more aimed at brokers and advisors who "service higher net worth clients," Wanstall says, advisors who are doing asset allocation as well as pension consultants doing the same. It offers the Certified Investment Management Analyst (CIMA) designation, accredited by the Wharton School of Business.

"It’s like the CFA without the accounting, which is probably more germane to the investment advisory group that is not necessarily going to sift through financial statements to pick stocks," he explains. Roughly 60% of members are full-service brokers, and the Canadian chapter has about 200 members. The conference qualifies for CFP continuing education credits, as well as IMCA credits. Wanstall says IMCA is working on getting Advocis accreditation.

One of the conference speakers, Bill Hutchinson suggested earlier this month that the investment management profession is in crisis because pension funds in particular have removed asset allocation decisions from traditional investment counsellors and assigned them narrow mandates. That shift, coupled with an emphasis on benchmarking has turned the focus of investing from absolute returns, and in fact from active management, something Hutchinson thinks hedge funds may provide.

He remarked that hedge funds are nothing new, but represent a return to the "pre-pension fund days," before investment counselors were inundated with pension fund assets — "25 years of endless cash flow." When he joined the business in the early 1960s, investment counsellors were expected to manage all of a client’s money, not just part of it.

While those pension inflows made fortunes for investment counsellors, he says, they "destroyed the investment counsel industry." In addition, the pension fund focus on benchmarking led MPT "down the relative performance garden path."

Other speakers include Howard Atkinson from Barclays Global Investors on exchange traded funds, Dion Woods from Wells Capital on asset allocation, Daniel Brintnell from Harrington Lane on the high net worth in Canada, and Bruce Curwood from Frank Russell on the dangers of relying on past performance numbers. There are also business practice sessions. For more information, please see the IMCA Web site.

Filed by Scot Blythe, Advisor.ca, sblythe@advisor.ca.

(05/27/03)