Kate Stalter's  Instablog

Getting yield via the right blue chips is preferable to bonds these days, argues Glenn Guard. He also tells MoneyShow.com why he likes individual bonds rather than bond funds.

Kate Stalter: I'm speaking today with Glenn Guard, director of investment management at Campbell Wealth Management.

Glenn, a big topic on many investors' minds as we're speaking today is potential downsizing of the Eurozone, and what the global impact might be. You remain bullish about the US. So specifically, where do you see strength in the US?

Glenn Guard: That's a very good question, Kate. Now, we have to remember that this is a global economy. Only half of the S&P's earnings are generated inside the United States. The other half is generated elsewhere.

We also have to remember that the world economy is growing about 3.5%, most likely, this year, according to the IMF. So while there is certainly a lot of bad news in Europe, especially with Greece, Portugal, and Italy, as well as Spain, I think it's important to realize that that's one part of the world, but it's certainly not the whole world.

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Kate Stalter: When it comes to the US, then, how would you see that playing out for investors here?

Glenn Guard: When you look at labor's share of income, that's an economic term. What it essentially means is what the employees-take all the employees of the United States, take all the corporate profits of the United States. What is labor's share? What are the employees' cut of those profits?

When you look at the data, Kate, actually it's pretty interesting. We're at historic lows, when you look at labor's share of income.

So what does that mean? If you're a Marxist, you would say, "Wow, corporations are holding all this money and not giving it to the workers." If you're a free-market capitalist like myself, you say, "Wow, look at all that capital waiting for clarity from Washington." You look at corporate balance sheets, they're in fantastic shape. You look at unemployment, it's ticking down. I'm very bullish.

Kate Stalter: It also seems that when people make the Marxist calculation you were mentioning there, they seem to overlook the fact that many of these blue chips, many of these corporate entities-they are held in the retirement accounts of the working people across America. Do you agree that that would be the case?

Glenn Guard: Absolutely. The US stock market is still up about 7% to 8% this year, which is very good. When you look at stocks in general, especially the dividend-paying stocks of high-quality global companies, it's very attractive yields right now.

Kate Stalter: Give us a few examples of some of these that you like right now.

Glenn Guard: Sure, maybe if I can back up and kind of talk about bonds versus stocks, because I think this would make a lot of sense.

Let's say you have ten years and you have $10,000. You don't need that money for ten years. You can buy a ten-year Treasury today, a ten-year Treasury bond from the US Government. It's going to pay you about 2%. Guaranteed to get your $10,000 back, guaranteed to get your 2%. It sounds great, except inflation is going to be more than that.

So in real terms, in my opinion, you're actually going to lose money in terms of purchasing power if you buy US Treasury today. That, in my opinion, is irrational. It's irrational for a ten-year Treasury to yield below inflation. Therefore, what is the key word in a bubble? The key word, of course, is irrational.

I would argue that the bond market, in fact, is in a bubble today. I have no idea when the bubble will pop, and I have no idea if it will be orderly or disorderly. So I think I have established that most investors probably would do better by avoiding bonds, or most bonds.

So where do we find the value? Well, today you can buy Procter & Gamble (PG) stock. The stock is yielding about 3.1%. The dividend yield is 3.1%, so you're already getting a return better than what you can get with the Treasury.

Additionally, Procter & Gamble has raised its dividend each and every year over the last 55 years. They raised it in the middle of the financial crisis. In my opinion, they'll continue to raise it.

They're selling detergent to the Chinese, they're selling toothpaste to the Brazilians, they're in every major market in the US. They're a global company. So with companies like Procter & Gamble:

• you're going to get capital appreciation
• you can probably get a better yield than what you can get with bonds these days.

Kate Stalter: Now, obviously that's one of these main consumer staples companies. Is that the sector that you would be gravitating toward right now?

Everybody is looking at tech, with the Facebook (FB) IPO-obviously not for a dividend play, but nonetheless it's getting a lot of attention right now. So I'm asking: Are there other sectors that you like at this moment?

Glenn Guard: Absolutely, I think tech is very attractive in certain areas. One stock I like is Intel (INTC). It's yielding about 3% right now. They have an 80% market share of the semiconductor space.

And really, it's a play on a couple of things. It's a play on global GDP growth and this emerging middle class of folks who are buying a computer for the first time. I think Intel is very well positioned to capitalize on that long-term trend…and they're paying you 3%.

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Kate Stalter: Let me come back to what you were talking about a moment ago, about the irrationality of investing in the bond market, as opposed to equities.

As you're speaking about some of these yields in equities: In some of the recent market downturns-in the past decade or so, there have been some pretty big ones that are fresh in people's minds. Is that pushing people, perhaps, towards fixed income because they're a little bit gun shy about the equity market?

Glenn Guard: Absolutely, Kate, there's no question in my mind. I hear that from clients every day. We have a lot of folks who are shell-shocked over the last ten years.

We've had two major market meltdowns. If you look at the stock market, the ten-year period ending March 2009…so take the stock market's performance from essentially 1999 to March 2009, and it's the worst ten-year period in stock market history.

So certainly, there are a lot of Baby Boomers out there that are looking to retire, and they're very, very nervous about putting any money to risk. My view, and what I tell clients is, that you need to have purchasing power in your retirement.

I would argue that it's far riskier to own a bond fund today than it would be to own a well-diversified stock fund, in terms of purchasing power. So I turned it on its head and said, "Look, bonds are far more risky than stocks, especially a bond fund."

Kate Stalter: Why would that be? Why a bond fund is the riskiest?

Glenn Guard: Kate, that's a great question. We talk about this a lot, and this is something I'm really concerned about. I don't think the average investor has really focused on this.

A bond fund doesn't mature. If you buy a bond itself, you can hold it to maturity, and usually you get your money back if it's a good bond. You get all your money back plus interest. So you don't actually lose any money in real terms.

Of course, we talked previously, you might lose money in terms of purchasing power, in terms of what you can actually buy with that money at the end of the day. But you're not going to lose money in absolute terms.

Now the problem is that bond values go down when interest rates go up. I believe that interest rates are going to go up, and I can go into length about why I think that's going to happen over the next five to ten years.

So if you own a bond fund, the bond funds never mature. Your bond fund will go down in value, and there's no guarantee that it will ever come back in value. It's not like a principal thing. A bond fund is constantly buying and selling bonds to manage the portfolio.

I think it's very important that investors realize that a bond fund is not as "safe" as holding actually bonds in your portfolio. Quite frankly, I think that investors need to look at other kinds of asset classes to diversify, to try to get some safety of principal as well as capital appreciation if they're going to do well in retirement.

Kate Stalter: Last question today. Let me just follow up on your remark that you believe interest rates will be rising. Say a little bit about that.

Glenn Guard: Sure. Ben Bernanke is buying about 60% of the Treasuries, last time I heard, that are coming to market. That by itself is keeping interest rates artificially low. He's doing that on purpose, of course, to keep interest rates low so that corporate America can borrow money at a good rate, so they can expand and get the economy going.

Certainly a noble motivation, but the bottom line is someday he's going to stop doing that. I don't know when he's going to stop doing that and neither does he, but someday he is going to stop doing that.

Remember, it's supply and demand. If all of a sudden someone who is buying 60% of the Treasuries stops doing that, there's going to be less demand for the Treasuries. If there's less demand for the Treasuries, their values will go down.

Remember as the bond value goes down, the interest rate goes up. So therefore, I'm highly confident that interest rates are going to be higher than they are today within three years, and they could go up pretty substantially.

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Here are the seven areas where the baby-boom generation needs to be vigilant about their money-and it's not all about picking the right stocks to trade, says advisor and author Jim Sloan. However, he also tells MoneyShow.com where he's generating income these days for clients.

Kate Stalter: Today's guest is Jim Sloan of Jim Sloan & Associates .

Jim, you are also the author of a book called The Financially Informed Boomer, and I thought we could begin there today, that being a very important topic for our audience who are listening today. Tell us some of the highlights of this book and what you found.

Jim Sloan: Well, that's a good question. I would say that the reason I wrote the book earlier last year was simply because over and over, for the past 15 years, we see boomers in our office here. And they pretty much, most have the same concerns, the same issues, the same topics continually come up.

And then as we're going through our discovery meetings, I get a lot of this quite often. They say, "Why haven't I ever known about this before? Why haven't I ever heard about this before?" And those kinds of things. So I thought, "What's the best way to get this information out to people? Well, daggumit, just write a book." And so that's what I did.

There are just really seven chapters in this book. You can probably take less than two hours to read the thing, because I want to get right to the point, and I don't want to put a whole lot of fluff in there.

The first topic that I discussed is know when to begin your Social Security benefits. You know, a lot of people, a lot of boomers, they just think, "Well, hey, once I hit 62, I can get early benefits. I'm going to go ahead and take it and at least have some income to kind of start my retirement with, and then I can add from there."

I will tell everyone out there that if you think that taking early benefits at age 62 is in your best interest, you may be right, and you may be wrong. Here's what we know: If you start taking Social Security benefits at age 62, and you live well into your 90s, you will leave hundreds of thousands of dollars on the table.

Now, that doesn't mean that it's not in your best interest to do so-I mean, if you have limited resources, you don't have any other income, you're not working-well, then you may need to begin early Social Security. However, on the other hand, if you're working, you have substantial assets, you may be able to defer those benefits well beyond full retirement age. That could be a tremendous benefit for that particular segment of boomers. So that's on Social Security.

The next item would be what we call: Know the investments you own. Another one of the big, big issues that we see routinely, Kate, and I'm telling you-every week, every week, last week was no different-I had a few prospective clients come in, and we discovered the same thing. And when I say, know the investments you own, most people, most investors, regardless of what they say-and I hate to say it like this-but they really don't know the cost to own their investments.

What I mean by that is: Somebody comes in here with a mutual-fund portfolio-last week, I had somebody come in here with about a $300,000 mutual-fund portfolio-and they're telling me, "Yeah, I'm paying probably a little bit less than 1% a year to own my funds."

Once we ran some reports, and we figured out and looked at what the disclosed and undisclosed fees are for these mutual funds that he had, he was paying over 3% annually on these funds. And he hasn't earned anything in the past ten years. So, he was saying, "I'm paying less than 1% a year," but the truth of the matter is, he was paying over 3%. So most people don't know the fees they're paying.

Another prospective client came in last week. She said that she met with two other advisors, and one of them recommended that she put $1 million into a variable annuity. Take it out of your profit-sharing plan, put it in a variable annuity, and they were touting this 10% guarantee.

Once we looked at the prospectus, and we got a little deeper on that, a little closer, dug deeper into the details, she actually would have paid-are you sitting down? I cannot make this up-5.45% a year in total fees. Almost 5.5% a year in fees is what she would be paying.

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Now, did she know this? Were they aware of this? The answer is no. I said, "How did you come about to know about this, anyway?" She said, "Well, it was somebody that was doing our profit-sharing plan, and they said, 'Hey, we can put this money into a variable annuity for you.'"

And how they got around to not telling this person they were going to pay $55,000 a year in fees is because they gave her a prospectus. Again, when I say know the investments you own, that's what you have to do.

And at our firm, that's so important, because we believe in transparency and full disclosure. What we do is help our client put all of the relevant information, all of the missing facts on the table, so that before you make your financial decisions, you have all the information to become informed. Because you have all the information on the table about what's in your best interest. And we're not seeing that much out there at all.

The third chapter would be talking about creating a lifetime paycheck. That probably ranks right up there at the very top of the list of what concerns boomers. You know-"I've been working for 25, 30, 40 years, now; I'm getting ready to retire in a year or six months, or I'm already retired. How do I take this lump sum, this chunk of money, my nest egg and turn it into an income stream?"

Well, there are a couple of ways to go about that. One is, we can put it basically into a conservative income portfolio that avoids excessive declines, and can generate 5% to 7% a year net of fees. Even in today's market, that can happen.

Or for some of those out there that want guaranteed income sources, we would use maybe a fixed annuity and add a lifetime income rider to that fixed annuity, just add an income rider to that. And there's a fee of anywhere from 0.5% to 1% for that rider. And the end result is, they're getting guaranteed income for life.

So it's really which direction do we want to go. Do we want income, or guaranteed income?

Kate Stalter: One sounds better than the other, definitely.

Jim Sloan: I'll tell you Kate, there is no "Everybody wants this or everybody wants that." You're going to have some on both sides of the fence, and we're certainly prepared to go whichever direction they're comfortable with, and certainly in their best interest.

The fourth item would be: Have a plan when your health fails. Again, being an advisor and wealth manager for over 15 years now, we have seen how most boomers do not have long-term care coverage. I would say, from the people I've seen, eight out of ten don't have it; nine out of ten don't have any coverage.

Their biggest concern is No. 1: First off, if you're 60 years old, and you're somewhat healthy, you don't see long-term care as something you need to be concerned with right now, unless you have a parent or relative that's went through or is going through long-term care services now, and is just wiping away their savings and nest egg, etc.

So they're saying, "Hey Jim, if the cost is too much-we don't want to pay $200 to $300 a month, and it's going to increase as we move along-and if we never need it, well we've paid all these premiums for these years, and we never get our money back."

For that person, what I look at, or what we talk about, is something called asset-based long-term care. Basically, it's a life insurance policy. You put a single premium in there. You put a chunk of money in there, and there's a chronic illness rider attached to this life policy. So basically it's a life policy with a long-term care rider attached to it.

Example: You put in a $50,000 single premium. You can get that money back, that $50,000 back, any time you want-today, six months, six years from now. It's a 100% money-back guarantee. Now, if they paid out any benefits, of course, they're going to take the benefits out of that $50,000, and then they'll give you the remainder.

The bottom line is you put $50,000 in-let me just throw some ballpark number here as an example-a 62-year-old female puts in $50,000, day one. She has maybe $90,000 of death benefit at day one. She also has about $200,000 to $250,000 of long-term care benefit. So she's basically taking $50,000 from a savings or CD or something that they had tagged for long-term care purposes in the future, and put this into a life policy. Now you've quadrupled, just about, your money for long-term care purposes.

So that's another way to go about protecting for long-term care, and it solves the issues of, "Well, I don't want my rates to go up, and I don't want to pay for something I'll never use." Well that solves both of those.

No. 5 would be avoiding costly IRA mistakes. Oh, my goodness. I wrote an entire book on how to avoid huge IRA tax traps back in 2006, and I wrote ten to 12 chapters on different IRA issues that people need to be aware of.

But the first mistake on IRAs is the belief that if you continue to divert taxes inside of your IRA indefinitely, that that's the best route for your particular situation. Meaning, put money into your IRAs your retirement accounts, you take your tax deduction upfront, and then down the road, when you take it out, eventually you'll pay your taxes.

Most people know that, but they never quantify it. They never understand really what happens. If I could take every boomer today or every young person today, and just fast-forward them all the way to they're 60 or 65 or even 70 1/2 when they have to start taking out minimum distributions, and they see what happens to a lot of folks that come in through my office.

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That is, "Jim, I'm 71. I have to take out $30,000 from my IRA this year because I'm required to, but I don't need the income. Yes, I know it's going to now make my Social Security income be taxed and push me in a higher bracket, but I don't need the income. Can I do anything about that?"

Well, no you can't. It's really too late at that point. So we see a lot of areas there where there are opportunities and different strategies to go about helping you maximize your IRA without having to go down that road.

The second thing on IRAs would be naming your children as beneficiaries. That's a good way to pass wealth from one generation to the next, and that might be the case, and it may not be.

I had a husband and wife, both age 84, recently the husband passed away in February of this year. He had a $700,000 IRA, and you know, under most instances, most people would have just have the spouse just roll it over into her IRA and keep taking RMDs [Required Minimum Distributions] and go on down the road. Right.

Well they had two children, both age 61, and my idea was this-and it just turned out to be phenomenal, and you don't run across this type of planning opportunity often, but when you do it surely looks really nice-the surviving spouse had no need for the income. And this $700,000 IRA of the deceased was throwing off about $50,000 of RMD. She had no need for the income, and she was already complaining that they were paying $17,500 a year in taxes as retirees.

So what we did is: We had her disclaim the IRA. Her two daughters inherited the deceased IRA, which is their dad, and they're stretching it now over their lifetime. And now, the $17,500 of income tax bill that the surviving spouse has now drops down to about $6,000 a year.

OK, so from a tax perspective, from a longevity perspective, maxing out the IRAs, I mean, it was just a great opportunity there for that to happen. So, summing the IRA picture up, there are multiple ways to maximize and to strategize different ways of going about maximizing IRAs; you just have to know how to go about doing that.

Kate Stalter: I know we're just kind of scratching the surface here today, but I know you've got a couple of more chapters you can tell us about quickly.

Jim Sloan: Yeah.. This is the sixth one-get a basic estate plan in order. Again, everything that I'm sharing today, Kate, is basically what I see on a routine basis, on a week-in and week-out basis.

Of the people that come through here, I would say 25% to 30% have a will, very few have a trust, the majority have nothing. "Yeah, I've been meaning to get around to do that, yeah we know we need to do that, yeah we've been talking about that." Or "Oh, I've got a will, but it was done in 1980, and I know it needs to be changed," and those kinds of things.

So what we do is, just introduce them to an estate planning attorney, and, "Yeah you guys can get this stuff done." These are things that people put off. So get a basic estate plan in order, and make sure it has a medical and financial power of attorney.

The last chapter of the book is: know the difference between a broker and an advisor. There is a difference, there is a big difference, and the regulators are trying to make changes now.

There's been a lot of news media about this over the past couple of years, but here it is: A broker is hired by a brokerage firm, and their allegiance is to their employer, and they only have a suitability requirement. "I can recommend something to you, and it just has to be suitable."

From an advisor standpoint, where I fit, we have a fiduciary standard to our client, where we have to do what's in their best interest. So that means we have a fiduciary standard as opposed to a suitability standard, and the differences between the two is basically quite large. In fact, the VA [variable annuity] example I gave you: This lady came in here and paid $55,000 a year for $1,000,000-well, that happened to be a brokerage firm that recommended that to her.

A lot of the things that we are seeing-brokers, brokerage firms are recommending variable annuities, high-expense mutual funds-and a lot of it is just not disclosed. I mean they give them a prospectus, but it's just not disclosed because these people coming in, they don't know what they're paying. They have no idea.

And the last piece there, the broker and advisor, you know, just seek out a trusted advisor and just know what you're dealing with there. So that's the seven chapters, and again, I just tried to hit a couple of little notes on each one of those chapters, and I just think that's ideas and strategies and techniques.

There are two types of people out there. You've got the uninformed, and the informed. And that's what I try to do, is inform people. That's why I wrote the book, The Financially Informed Boomer.

Kate Stalter: Speaking of being informed-let's talk about where you are generating income these days. Obviously there has been a whole lot of attention on some of these very prominent stocks-Apple (AAPL) could be a big example, of course.

And then a lot of people from the other side say, "Well just try to benchmark to something like the SPY or maybe some kind of dividend-paying index, dividend-paying fund." What is your strategy for seeking income, and how are you generating that for your clients right now?

Jim Sloan: Okay, just to be clear: We have money managers for our clients, institutional-level money managers to generate income for our clients. And as you know, the current low-interest-rate environment is certainly penalizing those who save, by dramatically reducing the level of income, and the number of places they can find reasonable income return.

It also prevents the traditional retirement cycle from working. If you don't have the ability to generate 4% or more of consistent readily accessible low-risk income, well, what's going to happen? How do you go about that?

I'm here to say today that institutional money managers that we use certainly have been and are generating 5% to 7% yields, and they are attainable today, but you have to look globally and across different asset classes that may seem unfamiliar, such as global infrastructure stocks.

These are companies that operate seaports, toll roads, and utility lines. We mixed in some master limited partnership and real estate investment trusts that are paying 6% to 7% dividends. There are some substantial yields you can find in high-yield bonds and preferred stocks.

Now, I'm not saying that they go in and buy this stuff and hold on to it; these are actively managed accounts, and they are buying and selling throughout the day and week. So, there are ways to generate that you just have to know where to look.

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Among Hatteras Funds' investment vehicles are one that utilizes hedging strategies of several managers, while another gives investors exposure to a long/short equity strategy, as president Bob Worthingtonexplains to MoneyShow.

Kate Stalter: I am speaking today with Bob Worthington, president of Hatteras Funds.

Bob, you specialize in alternative investment strategies. Maybe we could begin today by discussing the Alpha Hedged Strategy Fund (ALPHX), and what you're incorporating in this particular vehicle.

Bob Worthington: Certainly, thank you for the time. In the Hatteras Alpha Hedged Strategy Fund, what we try to do is put together a diversified portfolio of hedged strategies.

So we are able to go out and find different hedge-fund managers and get them to run separate accounts within our mutual fund structure, putting together a multi-manager, multi-strategy portfolio that in many ways is just similar to the old fund-of-funds model in a partnership format, although we are able to do that in a daily valued, daily liquid, fully transparent mutual fund.

Kate Stalter: Are you seeking hedge-fund managers with widely diversified strategies? How does that work?

Bob Worthington: It depends on what we are trying to accomplish. So, out of the 21 hedge-fund managers in there, we have a few hedge-fund managers that would be considered kind of multi-strategy oriented, but the majority of the portfolio is full of the hedge-fund managers that have specific capabilities and focus on distinct strategies, such as long-short health care, for example, or convertible arbitrage as another example, or emerging-market debt.

What we are trying to do is find, for the most part, are managers that have specific areas of expertise within a well-defined area, and then put those together in a well-diversified portfolio.

Kate Stalter: As you know, Bob, a lot of retail investors, when they think about their investment portfolio, they focus on either equity or fixed income, more plain vanilla. How do you envision this fund being factored into an overall portfolio?

Bob Worthington: What we have seen in the last three or four years, with the growing advent of hedged mutual funds, are retail investors and their financial advisors utilizing these strategies in a much broader way, and throughout the portfolio.

So for the Alpha Hedged Strategies Fund, advisors and their clients have really used this in two different ways. You can use this as an equity substitute, because we believe over the long run we can give you equity-like returns, but with much lower standard deviation, volatility, and downside deviation.

Others use us as a fixed-income substitute, because they believe where we are in the investment cycle, that the returns for high-grade corporates and certainly government securities are going to be very low over the next five, six, or seven years. And they use this as a fixed-income substitute, really looking for greater returns than what you could get in a high-grade fixed-income portfolio, and yet the volatility is not that much different.

Kate Stalter: Is this something that investors can buy just directly through you, or through their broker, or do they need to go through an advisor?

Bob Worthington: They could do it a number of different ways. They can use a broker, they can use an advisor, and they could also come direct to us in many different ways. It is really what makes sense for how the individual or institutional investor invests, either on their own, or through the use of an advisor, a broker, or a consultant.

Kate Stalter: As you're aware, one of the factors that has been critiqued about this fund has been a relatively high expense ratio-about 3.99%. What is your response to that?

Bob Worthington: The response that we give, and the response that is given to us by advisors or consultants that understand the fund-of-funds business, is actually the fees, the total fees on this versus a traditional hedge fund-of-funds portfolio, are actually very low. First of all, very competitive, and lower than what you would get in the old partnership days.

So, while 3.99% sounds expensive-we also have a share class for certain investors that is at 2.99%-that is actually less expensive than what most investors have paid. Even high-net-worth investors, or institutional investors have paid, when they go into partnerships.

The fees that were quoted there are actually all-inclusive of not only our fees, not only the administrative fees, which include legal and Blue Sky and audit and all those, but also the underlying hedge-fund manager fees too. So actually it is a very competitively priced, if not actually less expensive vehicle, than what people have had access to in the past.

Kate Stalter: So it is just a matter of what kind of asset class you are comparing that to, and framing it in? Would that really be what you are saying?

Bob Worthington: Exactly. I think there are investors and consultants that want to use a hedge fund-of-funds; there are those that may not want to. But when you are looking to incorporate a fund-of-fund model into your asset allocation, then you should compare it against other fund-of-fund vehicles out there. That is, again, where we actually are very competitive, and less expensive than most.

Kate Stalter: Bob, we have a couple more minutes here. I wanted to also talk about the Hatteras Long/Short Equity Fund (HLSAX). Can you tell us a little bit about that?

Bob Worthington: Certainly. As opposed to being a multi-strategy, multi-manager fund, the Long/Short Equity Fund is actually a single strategy that focuses exclusively on long/short equity, but also is a multi-manager approach.

So currently right now, we have six underlying hedge-fund managers in the Long Short Equity Fund, soon to be seven within the next week. And then, what we are trying to do, again, is put together a diversified portfolio of hedge-fund managers that typically have a specific area of expertise.

And we think that is a very good way to manage exposure to long/short equity, because managers on their own can be somewhat volatile. If you put together six or seven that tend to have low correlation among each other, then you have a well-diversified portfolio, one that can mute volatility, versus straightforward equity managers. And yet, over the long run, if you pick the right ones, it can still deliver equity or equity-plus-like returns.

Kate Stalter: Where would this fit in a portfolio, versus, say, the Alpha Hedged Strategy? How would you recommend that these are differentiated?

Bob Worthington: Clearly in our mind, this is an equity substitute, for one.

And second, we believe, probably-and of course you can never predict future performance, nor can you say that this is going to happen in one quarter or even one year-but over the long run, a five- or ten-year period, you should probably see higher returns from a long/short equity fund than you would from a multi-manager multistrategy fund, because within the multi-strategy fund, i.e., the Alpha Fund, we have exposure to debt-type strategies.

So I think that is the differentiating feature and again, clearly, the Long/Short Equity Fund should be used as part of your distinct equity allocation.

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