Updated Wednesday, September 17, 2014 as of 5:37 AM ET

Balancing Risk in the Search for Opportunities

DALLAS - Have you thought about investments in cement companies in China or Ghana?

Those represent the type of possibilities Paul Bouchey, the managing director who leads the research team at the structured portfolio management firm Parametric, and Scott Clemons, the chief investment strategist for Brown Brothers Harriman, consider when they evaluate opportunities and risk taking. The two spoke on a panel at Bob Veres’ Insider’s Forum on Sept. 18 in Dallas, Texas

Bouchey and Clemons both say they believe the emerging economies in the world are where equity opportunities are to be found. Clemons says he believes that despite “concerns that those markets are overdone.” Meanwhile Bouchey says he looks “particularly at the smaller countries” in those emerging market equity opportunities. 

Kathleen Gaffney, a vice president of Eaton Vance Management, who served on the panel with Bouchey and Clemons at the conference, agreed that risk taking had become a necessity of sorts since “investors have 2008 imprinted on their minds.” Therefore, “previous correlations” about the market’s performance in an economic recovery “are not going to work,” she said. Advises Gaffney, "Risk taking will be an antidote,” to that change.

In contrast to her fellow panelists, Gaffney favors U.S. equities and in particular some in Europe, because those economies have lagged in the worldwide recovery and therefore offer risk takers opportunity now.

Asked how he manages such risk as found in emerging economies, Bouchey, whose firm advises only on equities, says his formula relies on the simple notion of opposites. If everyone loves Brazil, he makes sure portfolios have plenty of that but investments in Egypt, a country with a more dubious outlook, too. “That’s what we do. We look at what is underweighted,” Bouchey says. That theory works because the portfolios he helps structure have thousands of stocks. For an individual investor, with possibly only 10 stocks, Bouchey warns, such an approach “could easily blow up.”

But Clemons warns that now is the time to get clients to focus on rebalancing portfolios, even though the markets are humming. “You can’t wait until a crisis, people are comfortable with their returns now but now is when you have to educate them,” he says.

Read more:

Get access to this article and thousands more...

All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.

Already Registered?

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

Already a subscriber? Log in here