(text of email sent 8/23/10)
To our clients:
Consistent with the client service upgrades we mentioned in our recent media release http://69.89.31.199/~brintone/media/press-releases/2010/August-03-2010.aspx, we want to make you aware of two specific enhancements we are making to serve you better. The first relates to tax planning; the second, to investment management. In connection with your investments, we also wish to advise you of several changes to your portfolio allocation that we are implementing.
Tax Planning
We continually look for ways to better deliver the services that matter most to you. In the area of taxes, there is clearly more long-term value to you in strategic tax planning than in annual tax compliance. Accordingly, we would like to further shift the balance of our time and effort on your behalf from tax return preparation to developing the best income and estate tax strategies for you and your family.
After much due diligence, we have decided to enter into a strategic partnership with Clyne Eagan & Associates, a well-respected accounting firm with whom we have a long-standing relationship, to assist us with some of our tax return preparation. For those of you who will be directly affected by this change, you will be hearing from your financial advisor before mid-October to discuss how your tax return preparation will be impacted. Our intent is to make this change as seamless and cost-neutral as possible for you.
We will continue to directly provide you the more value-added tax strategy and planning services, as in the past. In fact, as we said, the purpose of this change is to allow us to devote more attention to delivering world-class service in this area.
If you have any questions prior to hearing from your advisor, please do not hesitate to contact us.
Investment Management
Another part of our service enhancement is to accelerate our ongoing efforts to bring the very best science possible to the management of your investment portfolio. We are making sizeable investments of time and capital to upgrade our research and analysis capabilities — partnering with leading researchers, academics, model builders, industry experts, and like-minded firms as appropriate — with the goal of constructing the safest and best performing portfolio we can for you in these unusually turbulent and unpredictable times. It is clear that these times are calling for responses beyond what has traditionally worked in the past; yet, at the same time, we must be careful not to depart from those economic and financial principles that remain fundamental and timeless.
The changes we are considering and extensively testing are potentially significant. We will be reporting on them as we complete our analyses and testing in the months ahead. At this point, we will be making the following changes to your portfolio:
? We will be substantially curtailing our investment in the managed futures investment that tracks the CTI (Commodity Trends Indicator) index — this investment appears in your portfolio under the symbol DXCTX and/or LSC. As we indicated when we introduced this investment in 2008, it is expected to do well when commodity prices show a pronounced trend in either direction (indeed, it was one of the very few investments that appreciated in the second half of 2008 when virtually all asset classes, including commodities, declined at once). It is expected to do not so well when commodity prices fluctuate quickly back and forth within a narrow range. This latter scenario has been relatively rare historically, but has persisted for many months now, and we are concerned that it may persist for several more months in the current economic environment. We remain positive about this type of investment in the long term, and therefore are not exiting our positions entirely, but are substantially scaling them back given current conditions.
? We will be eliminating, for the time being, our investment that tracks the S&P GSCI (Goldman Sachs Commodity Index) — this appears in your portfolio under the symbol QRAAX and/or GSP. Relative to other commodity indexes, GSCI has a heavy allocation to crude oil, which we would prefer to reduce at this time. Further insight into our thinking here can be found in our blog http://blog.brintoneaton.com/2010/08/controversy-over-commodities-%e2%80%93-a-good-thing/. (If you are interested in receiving our blog posts automatically, please click the RSS tab on the blog and register.)
? We will be reallocating the proceeds from the above two transactions into a series of other investments. One is a commodity index that tracks the DJUBS Commodity Index, which has a much smaller allocation to crude oil and a heavier allocation to other commodities such as precious metals. (Note that, in the aggregate, our total allocation to all commodity-related investments, including CTI-related investments, will be considerably reduced with these changes.) Additionally, we likely will be adding to our market neutral investments, perhaps via a mutual fund on which we are conducting on-site due diligence. Finally, we likely will make an allocation to a new ETN (exchange traded note) that tracks an index designed to provide exposure to the S&P 500 with a layer of protection against sharp declines. This latter investment is expected to be similar in impact (though not in approach) to the Deutsche Bank structured note that has worked well for us to date.
Since you each have a unique portfolio (based on your investment strategy, tax situation, cash needs, portfolio constraints, etc.), the magnitude of the above changes will be specific to you. These changes will occur in a deliberate and orderly fashion over the balance of the third quarter. As always, please let us know if you have any questions.
P.S. There has been healthy early interest in our September 29 webinar “Does Your Portfolio Have a Safety Net?”. A few of you have asked whether you can extend the invitation to friends and family. Please do. You can do so by simply forwarding the email invitation you received (let us know if you need to receive another invitation) or by directing individuals to our website www.brintoneaton.com, where they will find a registration button on our home page. Just be sure, since there is an attendance limit, to register first for yourself!
On behalf of your team at Brinton Eaton,
As always, let us know if you have any questions.
