The Sunday Drive - 01/29/2023 Edition
👋🏻 Hello friends,
Let's take it easy and enjoy our leisurely Sunday Drive around the internet.
Vibin'
The Vibe of the Week is one of patience and persistence. That’s pretty much the underlying theme in this edition of the Sunday Drive. Please enjoy The Long Run, the title track from The Eagles’ 1979 album.
💡 Quote of the Week
"Excellence in anything is mostly about working hard and getting a lot of small details right. Execution is exponential. The “big idea” is just a seed. How the seed unfolds is what really matters.” - Nathan Baschez
😊 Sharing The Ink From the Week
I’m so appreciative of the good folks at Hedge Fund Alert for the interview this week.
January 25, 2023
Reprinted with permission by Hedge Fund Alert
Eaton Vance Alum Plans Retirement Fund
Veteran equity portfolio manager Mike Allison plans to debut a hedge fund that he’s positioning as a low- cost, tax-efficient and distribution-friendly alternative to annuities and fixed-income investments.
Allison retired from Eaton Vance at yearend 2021 and last year launched New Lantern Advisors. He ended his more than 21-year tenure at the Boston firm as global equity portfolio manager and director of equity strategy implementation, sharing oversight of $56.8 billion of assets in closed-end funds, mutual funds and exchange funds, also known as swap funds.
Allison launched his Saratoga Springs, N.Y., operation in April 2022 originally as an advisory firm serving wealthy individuals and family offices before shifting his focus exclusively to investment management. He continues to manage a handful of separate accounts totaling less than $10 million but is no longer accepting new wealth-management clients.
Allison intends his New Lantern Hedged Equity Fund to use equities and options to deliver cost-effective and tax-efficient retirement income. The strategy is inspired, he said, by closed-end funds he managed at Eaton Vance. But with New Lantern, he’s able to shed the limitations of the Investment Company Act of 1940 while delivering low-volatility, risk-adjusted after-tax returns.
“Coming from the ’40 Act world, the retail world, even though we managed very large pools of assets, the constraints of the 1940 Act for retail funds really leave a lot of the benefits from tax management trapped inside the fund,” he said. “That’s why I had this idea of delivering on these strategies in a way that the clients could more directly benefit.”
Tax management will be a key element of New Lantern’s strategy, which focuses on the most liquid parts of the market, Allison said.
The vehicle, which he expects to begin trading in March, will invest primarily in the shares of large-cap U.S. companies, as well as in U.S.-listed options on stocks, exchange-traded funds and the S&P 500 index. It might also invest in non-U.S. stocks.
“By investing in stocks and options, we are able to have more control over taxable events and be much more active on the tax loss-and-gain realization than a typical investment manager might be,” he said. “This will allow for more tax-efficient distributions to investors over time as compared to distributions sourced from fixed income or even dividend income.”
New Lantern is seeking to achieve better-than-bond-like returns with bond-like volatility. Allison has been trading a similar strategy in separate accounts since April.
“It’s a really cost-effective solution for a real problem that exists in the world, but particularly in the U.S.,” Allison said. “We’ve got 12,000 people turning 65 every day. And if you’ve paid attention at all, you know when you have a 20% drawdown in the market and all of a sudden everybody wants annuities. And many people don’t fully understand or are not fully educated on the true cost of those annuities and the contractual obligation that the buyers of those annuities are locked into.
“And this is really intended to be an alternative to that. It’s very transparent, very liquid and flexible.”
Investors can elect whether to take distributions, how much and when to start or stop – in stark contrast to the one-size-fits-all distribution policies associated with the ’40 Act, he said.
Limited partners will pay a management fee of 0.65%. Allison hopes to cap expenses at 0.15% to 0.2%. The vehicle does not charge a performance fee.
Allison joined Eaton Vance, which was acquired by Morgan Stanley in 2021, in 2000 from Schroders Investment. He also worked at Fleet Investment and Phoenix Home Life.
📈 Chart of the Week
The Chart of the Week shows just how dramatic the impact of the aging (and ultimate demise) of the Baby Boom generation will be in the U.S.
In most parts of the world, population growth, and in many cases population itself, is declining. This is true in Japan, China, Russia, most of developed Europe, and in the U.S.
I predict that in the coming years, many countries will start to think more strategically about immigration as the cure for population decline. The U.S. may not have the immigration card all to ourselves to play for much longer.
Interesting Drive-By's
🤔 Rhetoric versus Reality - On the path to a carbon-free Texas.
💡 The App Tracking Transparency Recession - Apple’s App Tracking Transparency (ATT) privacy policy, along with consumer preference changes reflecting a reversion to pre-COVID behaviors, has created a recession within the social media advertising economy and certain other advertising-dependent categories.
📈 Entrepreneurship Boom - In the early years of the pandemic, Americans filed a historic number of applications to start new businesses — importantly, ones that were likely to employ other people.
💸 A Comment on Profitability per Employee in the Financial Sector
🧐 The Age of the Sage in the Workplace - In 2019, 57% of Americans in their early 60s were still working. This number was just 46% in 2000. Improved health and shifting industry patterns—more jobs in offices, fewer in factories—played a significant role.
So did sheer financial necessity. The housing bust and stock market collapse left many without enough retirement savings. Virtually all of the growth in the labor force between the end of the Great Recession and the start of the pandemic a decade later came from workers 55 and older.
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em at me.
I hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mike
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