Riley: Beat the Treasurer
Tuesday, January 10, 2017
Last week, we printed prominent market forecasts that fell well short of Treasurer Seth Magaziner expected Pension Plan rate of return of 7.5%. I guaranteed in the article that I would beat Magaziner’s return from January 31, 2017, thru January 31, 2018, using only one investment, a Beach Street Buffer based on the S&P 500 (Exchange Traded Fund known as SPY).
But, I also want you, interested Rhode Islanders above age 21, to challenge the Treasurer by selecting your own mix of Cash, Equity Indices and Fixed Income.
Beach Street Financial Services LLC is announcing a contest to outperform the State of Rhode Island Pension Plan over the next year. Entries will be free but limited to 2 per person. This is one reader's chance to win $500 dollars and to have $500 dollars contributed to their favorite charity.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAs you know, the Treasurer pays lots of fees to professionals to manage Private Equity investments, Hedge Funds, Real Estate and Venture Capital funds. We believe he doesn’t need any of these investments and that they are politically driven and that he can achieve higher returns with less risk and at lower costs. Just last week despite claims of “back to the basics” he and Cliffwater and the Investment Commission put $57.5 million into alternative energy investments.
Entrants will be asked to create a portfolio of Stock Indexes, fixed income Exchange Trade Fund AGG and/or cash. A sample Portfolio entry would be chosen from the following financial instruments:
1) SPY – the first Exchange Traded Fund, introduced by my father Ivers Riley, tracks the performance of the S&P 500.
2) IWM – an ETF tracking the Russell 2000 index of small cap Stocks.
3) AGG – an ETF, the iShares Core US Aggregate Bond -The investment seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment-grade bond market. The index includes investment-grade U.S. Treasury bonds, government-related bonds, corporate bonds, mortgage-backed pass-through securities.
Sample Portfolio Entrant 1
57% SPY, 14% IWM, 23% AGG and 6% cash.
All contestants will be competing against the portfolio return of Treasurer Magaziner, determined over a one year period from 1/31/2017 until 1/31/2018.
Contestants will also be competing against the traditional Prudent Portfolio for Pension Assets known as “60/40” which will consist of 60% SPY and 40% AGG. In addition to those portfolios, contestants will be competing with Beach Street Financial Services (me) and a “Beach Street Buffer” available only to clients of Beach Street. The Beach Street buffer is mathematically designed to produce a pre-defined outcome based on either the SPY or IWM indices.
Importantly, Magaziner can and will continue to actively manage his portfolio in order to navigate the markets, the rest of us will stay with our picks on January 31, 2017, and can make no changes all year. Treasurer Magaziner's current portfolio composition and track record can be found here.
Over the last 3 years ended October 31, 2016 (because the site is not updated) ERSRI (Magaziner) produced 3.9% returns versus 60/40 return of 3.5% and versus expected returns of 7.5%. While we wouldn’t be surprised if many of you outperform Mr. Magaziner in 2017, we would absolutely be shocked if any of you outperformed both Magaziner and our Beach Street Buffer, but if you do manage to beat us both, that one entrant with the best return that also out beats us will receive $500 from me. If you beat both of us and the expected rate of return I will also contribute $500 to your favorite Charity.
Final rules and values will be subject to what we can legally offer and in the interim questions can be directed to [email protected]. Details and standings will be available here.
Good luck to all of you. Maybe we can teach the Treasurer something.
Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.
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