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Cross posted on Fund Forum Board
My wife is on the BOD of a local non-profit. Recently they have been urged to invest their assets in one of the bond funds at this advisory company (http://www.seixadvisors.com/index.php). Any one here have experience with/knowledge of this company.
TIA
Kevin
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No. of Recommendations: 6
Kevin,

Who is urging them? What is the stated purpose of those urging them?

My knee jerk reaction having been part of many non-profits is that I don't trust the suit trying to "help" us when it just so happens that either they happen to have a product that helps or they have a friend that does. Also there are many very smart in their field folks who drink the kool-aid marketed by Wall St. These folks are well intentioned and they just happened to be reading in Barons or some other mag that bonds are the place to be. I like to read Barons when I have a 1/2 hour to kill in the library or some Dr.'s office, it doesn't mean that I agree with their headline articles.

Is this non-profit seeking to grow some of their assets? Do they expect to hold these assets for an extended period?

Honestly the simplest and safest approach would probably be creating a sub committee and opening a Treasury direct account and stashing funds that don't need to be tapped for several years or decades in a ladder of some sort. This would also work for "working principal funds" where some amount of money is invested and the returns from that investment are what is deployed for the non-profits projects. Treasury direct has no friction costs, no management costs and is as "risk free" an asset as can be found. Are you going to make a killing investing in Treasuries? Nope but you don't have to worry about Schister and Schister nickle and diming you either.

jack
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jack,
Thanks for your reply.
The person doing the urging is a member of the Board of directors. What his purpose is, I have no idea nor do I think does my wife or her other fellow Board members. She comes home from meetings at times and wants to tell me little snippets of what went on and get my take. My take is usually very little other than this Board of directors takes a lot on faith. My own sense is that even if the people proposing actions are doing so in good faith, there is very little due diligence going on. I suppose I posted my open ended query to see if there was anything egregious in Seix's record that might propel the Board to investigate more carefully.

Again, thanks,
Kevin
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Kevin,

I'm not a fan of most funds so I am the wrong person to ask about Seix. I can offer some advice on how do approach some aspects of due diligence.

The web site is a good place to start. Read everything, even the stuff that doesn't seem directly related to this non-profits needs or interests. What you are really trying to do is get feel, a sense, for the people more than their process or their products.

For instance, when you click on a mutual fund it bounces you to Ridgewood funds. http://ridgeworth.com/funds/taxable-fixed-income/total-retur... They state in smaller print Mutual Funds
(available as RidgeWorth Funds)
So they aren't trying to fool anyone. The question I have is if they are an asset management team why is are the mutual funds under someone else' label? Are they picking assets for the funds and Ridgewood "hosts" the fund? Or are they picking funds for the clients, if so can you do better than a Ridgewood fund. If you pick around the Ridgewood page you see that Seix is listed as a "sub-adviser" what ever the heck that is.

Pop open http://ridgeworth.com/includes/files/resources/files/1271885... and we find that this particular fund doesn't outperform its comparable index the "Barclay's Aggregate Bond index". Which means that it may be cheaper and easier to buy a bond Index fund or ETF that tracks this index or possibly shopping for a CEF with a good management team. Scroll down further and we find that this is a front end load fund, they take a sales charge at initial purchase after that they charge you the expense ratio.

Other things I would run down is that I would Google and every other search engine everyone listed as part of the management team and find out more about them. I would also read everything that they have under their white pages/news release page. Are they really any different that 900 other bond funds, if so is the difference worth the cost.

Is there anything egregious? In my 10 minute peak I haven't found anything, nor did I find anything that would encourage me to mail them a check.

Well intentioned folks working for a non-profit often assume too much about the knowledge of another good intentioned board member who brought up what seems to be a reasonably good idea. Most of the board members are part time and are happy to donate time to the tasks appointed or volunteered for, they assume that everyone at the table who has a task is being diligent because they have more than enough to do, they don't have time to peak over another volunteers shoulder.

I find myself back where I was on the original post. Why does anyone on the board think they should invest some of the non-profits funds? If they are going to invest why a bond fund? If a bond fund what kind of bond fund? If a particular type of bond fund why a Seix/Ridgewood fund?

good luck and feel free to keep asking questions

jack
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jack,
Thanks for being so generous with your knowledge and suggestions. Between your first and second posts, I showed my wife your first post and we had a bit of a knock down, drag 'm out set to over the whole matter. Her response was basically that two other Board members were a CPA and a banker, and that the Board had hired/arranged?? to have a Morgan Stanley person research the whole matter for them. She showed me an 'impressive' binder of the MS person's research which included 4-5 sub-proposals which include, with the Seix possibility, a CD ladder, another 100% fixed income option, and a couple of more diversified options. The research to me looked mostly past performance based with oodles of charts and tables, alphas and betas etc. It seems to me that the Board wants to make a little money without much risk and that the presentation allowed them to feel they were being conservative but would bring more income than the CD ladder. I don't believe they took into account the risks in bond funds, nor especially the effect of fees.
But it's pretty clear my wife doesn't care to hear more from me. I still appreciate being able to swap concerns and tactics with you.

Kevin
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No. of Recommendations: 13
Kevin,

<sigh> Didn't mean to spark a tussle between you two, so the following is mostly between us and quite possibly mostly for my need to vent.

An accountant is an accountant not a certified financial analyst, the same goes for the banker. This doesn't mean they don't know how to invest it also doesn't mean they do know how to invest. I have met and worked with both ends of the spectrum good bankers or CPA, head in the sand investors/ good bankers and CPAs that are free enough thinkers to recognize their degrees and specialties don't automatically make them good investors so they learned how to invest. Honestly one of the things that seems to trip these folks up is that they are in close enough industries that they believe that they are being treated as a peer and not just another client. They trust these folks because they trust most other bankers or CPAs. Educated folks in general seem to believe they are above being "sold" something as if their degree in whatever some how makes them impervious.

Before the financial blow up I had little investing respect for most of the SALES staff of any of the big brokerage houses. I say sales staff because I mean sales staff. They are not the stock picker, analysts or the managers of anything. They know the lingo and can talk a good game but in the end they listen to a the client and pull off the shelf the nearest thing and/or pitch what their supervisor tells them to. They will try to convince you that a square peg will fit that hexagonal hole not because its the best option but because that is what they are paid to do. To top it off upper management just about created financial armageddon across the entire industrialized world, why on earth would we think that they have the clients interests at heart now? Bring them Gates Foundation money and you might have their attention but the rest of us are dung beetles to be fed the proper diet.

Frankly if the sales person threw Seix at me I would show them the door, that's after having spent 10 minutes looking at the set up. Who ever printed the package does not have the boards best interests at heart because there has to be better options. At best their funds are average. Why on earth would I pay a front end load + annual fees for average? I start out behind as soon as I mail them a check thus guaranteeing below average results. Unfortunately, this is frequently how the whole investing adviser process plays out. It is so odd that many will drive across town or to another town to see if another car lot has the same or equivalent car for less but take a Morgan Stanely's pitch man's pitch on faith. Its as if only one of them has a product to sell.

Part II of the rant. Why do people keep thinking that if they are investing in a bonds, a managed bond fund or an index bond fund that they are automatically making a conservative aka safe investment. They avoided junk, whoop-dee-stinking-doo Scooby Doo can avoid buying junk, doesn't mean I would trust the mutt to do the smart thing. How many times have we watched Shaggy and Scooby take the "safe" route and end up running from something scary?

There is a distinct possibility that we are in a bond bubble. Prices are very high, interest rates are at extreme lows. With Europe gagging on its current debt load a flight to "safety" has, yet again, driven prices up/yields down. How long do we expect such extreme conditions to continue? Do we really expect Europe to stink the GDP numbers up for the next 5 - 10 years? Do we really expect the bottom end of the curve to stay at zero for another year or more? Do we really expect the supply we keep dumping on the market not to start to overtake demand, for the next 3 - 10 years!?

Prices will fall. I wish I knew when and how far then I would be one rich genius; I could then write a book about how smart I was and make even more money.

Now, go rub her feet or her back or pop her a big bowl of popcorn and watch Ghost with her or draw her a nice warm scented bath or get her a double scoop of her favorite Ben and Jerry's or make her cookie dough. If some non-profit wants to buy magic beans or invest in a Seix managed fund or hide their money under a mattress then we can wish them the best of luck and get on with our family life. They will either succeed or they wont. The second option is a truly ugly option within the family.

jack
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