“We’ve lived with the classic Morningstar style box approach for a long time, but that doesn’t work anymore,” White said. “The nine box model is toast.”
Rather, advisors should be thinking about investment themes, White said. He offered ten themes to consider instead: income, cyclicals, defensives, longevity, scarcity, tax-advantaged, stable earnings, variable earnings, dividends, and non-dollar. “The pie charts of the past won’t be the pie charts of the future,” White said.
He also suggested advisors be ‘tactegic’ with their asset allocation, a mix of both tactical, and strategic. “It’s not so much about whether or not to use alternative investments, it’s about having an alternative view of investing,” White said.
While many investors and advisors got caught up with impressive returns and began to see alternative investments as the “holy grail” of investment products, now White said, they must see it for what it is.
“Alternative investing is not the holy grail, but it is another tool in your investment toolbox,” he said. “And if you use it in the right way, at the right time, it’s a superbly powerful tool.”
Currently, White’s team sees potential opportunity in three investment themes; income, taxes and scarcity.