Relative Strength is an investment strategy based on the belief that winning securities will continue to outperform. It provides a way for advisors to identify leading stocks in sectors and other market segments based on their history of outperformance. The premise is that investors should only invest in the areas of the market that have shown the ability to outperform. Investors should stay with those securities as long as they continue to outperform and then sell when they begin to fade.

Since relative strength is based on price, and not on fundamental research or your gut, emotion doesn’t Companies, sectors, and other market segments can establish themselves as leaders and even remain as leaders for years to come. 

Relative strength can also identify areas of the market that have weakened and should be avoided. This can help your portfolio adapt to market swings. It can also help you to manage risk. However, you should note that relative strength will not be able to target a stock’s exact top or bottom as no investment strategy can be expected to do so consistently.  Plus, waiting for confirmation that a stock is in fact a leader, allows you to avoid stocks that are short-term winners, but fail to establish themselves long-term. 

Relative strength’s ability to deliver outperformance has been demonstrated by numerous academic and financial studies. Since relative strength is simply the comparison of price performance in a universe of securities, it’s not difficult to develop a rules-based system for investing in high relative strength securities.

Nasdaq Dorsey Wright helps advisors identify Relative Strength stocks and sectors for them to include in their client portfolios. Click here for a free trial of relative strength research and tools.

CAIS recently announced that Mariner Wealth Advisors selected the firm to provide a customized alternative investment platform solution for the firm’s rapidly growing network of advisors. CAIS is a leading alternative investment platform for independent financial advisors. It provides advisors with a broad selection of alternative investment strategies, including hedge funds, private equity, and more. Mariner Wealth Advisors is a privately held advisory firm with over $60 billion in assets under advisement. CAIS will offer Mariner’s advisors access to a broad menu of alternative investment funds and products, educational resources, end-to-end digitized transaction processing, and third-party reporting integrations. Mariner’s advisors will receive access to a curated menu of diversified alternative investment products across asset classes and qualification levels. CAIS will also assist in the launch of proprietary funds and multi-manager funds managed by Mariner Wealth Advisors and enable the firm to add its own sourced third-party funds to the platform for centralized monitoring, transacting, and reporting.

Finsum:Alternative investment platform CAIS was recently selected by Mariner Wealth Advisors to provide its advisors with a broad selection of alternative investment strategies.

Fidelity Investments is expanding its alternative offerings with a new private credit fund. According to Ignites, the company registered the Fidelity Private Credit Fund as a ‘40-Act fund structured as a perpetual-term business development company. The fund will be managed by Fidelity Diversifying Solutions, the company’s new alternative unit. The fund, which will focus on lending to smaller firms, is looking to raise between $100 million and $1 billion initially. The fund will allow investors who don’t necessarily meet the requirements needed to invest in private equity, venture capital, or hedge funds. However, it does require them to have a gross income of $70,000 per year or a net worth of $250,000. According to the fund’s prospectus, net fees for the fund will range from 4.89% for institutional shares to 5.74% for S-class shares. It will also have a performance fee of 12.5% each quarter exceeding 5% growth and 12.5% of cumulative realized capital gains from inception through each calendar year.

Finsum:Fidelity is expected to launch a new private credit fund for investors who typically don’t meet the requirements needed to invest in private equity or hedge funds.

JPMorgan Chase has partnered with software firm Datamaran to create a data-analysis tool for clients to gauge the ESG risks facing portfolio companies and the ESG risks that these assets pose to the world around them. This is a concept known as double materiality. While the concept is already built into EU ESG regulations, this would be the first time it is used in the U.S. The new tool is called ESG Discovery. Jean Xavier Hecker, who is the Paris-based co-head of EMEA ESG research at JPMorgan and the designer of the tool, stated, “Double materiality is the only way to think about ESG in a way that is both forward-looking and comprehensive.” The tool, which is now available to JPMorgan clients, will use artificial intelligence to compile data from corporate disclosures, regulations, and online media. It is important to note that it won’t provide an ESG rating or score. Its focus is on unpacking individual ESG drivers.

Finsum:JPMorgan has partnered with software firm Datamaran to create a tool that uses artificial intelligence to evaluate ESG risks.

Before the pandemic, advisors and their staff were enjoying elevated compensation levels. But once the pandemic occurred, advisors suddenly needed to take stock of the financial health of their businesses. While the market downturn in 2020 didn’t last long, its effects led firms to become more conservative with their expenses. The continued volatility in the market resulted in firms looking to increase profit margins and aggressively cut costs. Rent and office expenses were the first to be cut, however, the largest expense by a considerable margin was non-owner compensation. According to an article in City Wire USA written by Damian Lo Basso, managing partner, and CFO at Journey Strategic Wealth, the years 2020 and 2021 were the first years since the financial crisis that many firms kept salaries and bonuses flat. In addition, some firms are now tying up to 50% of team members’ bonuses to overall firm performance.

Finsum: Due to the effects of the pandemic and ongoing uncertainty in the market, advisor teams are seeing their compensation being tied to firm performance.