PRIEST: INVESTMENT REVOLUTION

November 18, 2016

How technology is revolutionizing business and investing with award winning portfolio manager, Bill Priest of Epoch Investment Partners.

WEALTHTRACK Episode #1322; Originally Broadcast on November 18, 2016

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WILLIAM PRIEST

Consuelo Mack

Earlier this week I moderated a panel for the New Jersey branch of the Council for Economic Education www.councilforeconed.org a nationwide non-profit that works with teachers and educators for grades K-12 to introduce economics and personal finance concepts to schools around the country. More about the New Jersey Council for Economic Education can be found here www.njeconomics.com.

Our topic was “Economic and Market Reality Post-Election.” The panelists were three top finance and investment pros: Professor Burton Malkiel, economist, financial thought leader and author of the investment classic, A Random Walk Down Wall Street, Richard Bernstein, long Wall Street’s number one investment strategist before founding his own money management firm, RB Advisors, and now retired great investor, William Wilby whose Oppenheimer Global Fund was number one in its category for the 12 years he ran it. All three have been on WEALTHTRACK several times over the years. And yes, I wish I had brought our camera crew!

The headline is I left the discussion more optimistic about the economy and markets than when I went in. Professor Malkiel’s assessment is that despite the campaign rhetoric, President-Elect Trump is ultimately a pragmatist who won’t go to extremes and could get things done.

All three agreed that his pro-growth agenda of cutting corporate tax rates, repatriating the $3 trillion in corporate profits now overseas, spending on infrastructure, reviewing and possibly rolling back some legislation like the Affordable Care Act and Dodd Frank could boost economic growth and create jobs.

All three also agreed that economic recovery in the U.S. would continue for at least a few more years and that the bull-run in U.S. stocks still had a ways to go. The biggest change they saw happening: the nearly 4 decade long bull market in bonds had ended. Interest rates and inflation were turning and would trend slightly higher over the next year.

The biggest risks to their optimistic outlook were trade wars and draconian immigration policies which would exacerbate an already tight labor market in some industries. They are hoping Trump the pragmatist will prevail.

There is no question that it’s become harder to be a successful active portfolio manager. As we have covered in previous WEALTHTRACK episodes, 83% of actively managed mutual funds have underperformed their chosen benchmark indexes over the past decade.

Financial thought leader and frequent WEALTHTRACK guest Charles Ellis spent several decades analyzing money managers at Greenwich Associates, the investment consulting firm he founded and ran for years. After much research, debate and angst he has reached the conclusion that indexing is the best approach for the vast majority of investors, including himself. Here’s what he said in his investment classic: Winning The Loser’s Game:

“Investment management, as traditionally practiced, is based on a single core belief: Investors can beat the market, and superior managers will beat the market. That optimistic expectation was reasonable 50 years ago, but not today. Times have changed the markets so much in so many major ways that the premise has proven unrealistic.” 

What’s changed? The sheer volume, talent and resources of global market players have exploded.  As Ellis points out, institutional investors account for 98% of all exchange trades and an even higher percentage of off-board and derivatives trades. Since they are the market, they can’t beat themselves, especially when they have to  overcome the drag of their costs of doing business.

Another major change in investing is technology. The power of computing and data mining is staggering.  In many firms investing is largely computer driven.

This week’s guest, William Priest, is combining his traditional analytical approach with technology – and he is doing so successfully.  Priest is CEO, Co-Chief Investment Officer and Portfolio Manager of Global Equity Investment Strategies at Epoch Investment Partners, which he co-founded in 2004.  Epoch was named Institutional Investors 2012 Global Equity Manager of the Year.

Among the funds he co-manages is the MainStay Epoch Global Equity Yield fund which has beaten its market benchmark and Morningstar world stock category since its 2005 inception, with less risk.

Mainstay is a sponsor of WEALTHTRACK but we are interviewing Priest because of  his performance and  approach.

Priest is the author of several books on investing, including Free Cash Flow And Shareholder Yield: New Priorities For The Global Investor which details Epoch’s investment approach. His latest book, co-authored with two Epoch partners is Winning At Active Management: The Essential Roles Of Culture, Philosophy And Technology.  I began the interview by asking Priest why he calls technology the new macro.

If you are unable to join us for the show on television, you can watch it on our website, WealthTrack.com starting over the weekend.  If you’d like to see it earlier, it is available to our PREMIUM subscribers right now.

Have a great weekend, make the week ahead a profitable and productive one and have a very Happy Thanksgiving!

Best regards,

Consuelo Mack Mathews Asia

READ THE SECOND MACHINE AGE: WORK, PROGRESS AND PROSPERITY IN A TIME OF BRILLIANT TECHNOLOGIES

PRIEST: VERY BRIGHT FUTURE

  • Alphabet Inc A (GOOGL)
  • Price: $781.08 on 11/16/16
  • 52-week range: $672.66 – $839.00

GOOGL Chart

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Microsoft Corp (MSFT) MSFT Chart

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Alphabet Inc A (GOOGL) GOOGL Chart

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This transcript will be available soon. More information regarding WEALTHTRACK transcripts can be found here

William Priest from the WEALTHTRACK Archives:

No WEB EXTRA this week.


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