Dear Mr Read, thank you for accepting the interview. What is your opinion on passive and proactive investment?
Sander·Read：My opinion on passive and proactive investing is that there is a time and generally, an account size that makes sense for both. A blend of the two in one assets mix can makes sense even, because some markets are better covered by indexes, or passively because there aren't enough good active managers that cover that particular market. A mistake that is being made in the US in particular is that the largest passive managers are advertising that passive always wins, more or less, and that since it's cheaper, it's better to put all of your money in passive. This is the wrong approach and could be very harmful to investors because as a group, they are all in the same trade, like the S&P 500 for instance. What happens if everyone wants to sell at the sane time, which could very well happen? It would accelerate the decline or crash because there is no diversification in the holdings in people's portfolios. What I don't think will help the masses of passive investors is active managers that claim to be active but simply try to mimic the indexes. Many active managers hold so many stocks that are in the passive indexes, that they really don't add a lot of value to the portfolio management. This is the group of managers that drag down the overall performance of active managers, and they are called closet indexers. With the trend of assets moving in to passive investments, it makes the closet indexers performance even worse. Whether it's passive or active, it's a bad idea to put all of a portfolio into one strategy. But if everyone is moving into the same strategy, it's really bad. Clearly the best investors in the world, like Warren Buffet, are active investors. Their skill and ability to outperform the indices is proven over long stretches of time. So it's been proven that active is the best style of investing, but it's necessary to find those types of managers for the markets they can benefit from active management. Interest rates also play a part in whether active or passive is in favor. If interest rates are falling, as they have been for the last two and half decades, passive is generally favored. If intersect rates are rising, then active managers tend to do better.
Larger accounts can benefit more from active managers because they have more money to deploy to different strategies. Smaller accounts have fewer choices, so in that case passive investing makes sense. Larger portfolios also can be customized using both active and passive managers.
How do you define the strategies lyons use? Is it focused more on defense or attack? Is it passive or proactive investment?
Sander·Read：Lyons uses model driven, active management that stays on the attack most of the time. Historically, our models have been in the equity markets 70% of the time and in Treasuries (defense) about 30% of the time. It is actively managed. Though most of the time markets are normal and do not crash, we think it's equally important to avoid the major market downturns if possible.
In order to meet variable market demands, some investors think it is necessary to change according to the demands, others prefer to hold tight on principals rather than implementing interactive changes according to demands. What is your option on it? Under what kind of circumstances the first action is preferable? Under what circumstances the second action is preferable?
Sander·Read：I don't really understand this question but....investors should have a long time horizon for investing, not short term. In my opinion, it is necessary to modify portfolios from time to time in order to capture macro economic trends as well as trends in the markets. It makes no sense to stay in an investment that underperforms for years on end for the sake of "holding tight". But once again, time frames and risk tolerance vary for each investor, and that has to be taken into consideration when designing portfolios and strategies. Timing on portfolio alterations again depends on the markets, the investments, and the investor and their time.
You’ve successfully avoid the 2008 crisis(the model) I think. So what analogy in the program helped you to do that?
Sander·Read：The major component of our Quantitative Risk Indicator is momentum during different time frames. It is designed to indicate a bear market to exit and the beginning of a bull market to re-enter. Long term market momentum give a pretty clear indication of market direction. It does not catch short term disruptions in the market, like flash crashes and mini "cuts" in the markets. It's designed to identify long term trend changes and signal when to get in and out of them. Our model signaled in 2008 and then re-entered in 2009 because the trends were consistent and sustainable. (Please note we were not managing real assets in the program at that time and that it was a model signal.)
七禾网5、2016年，莱恩斯荣膺汤森路透理柏（Thomson Reuters Lipper）评级第一，主打策略“莱恩斯战略资本投资组合”（Lyons Tactical Allocation Portfolio）荣获晨星网（Morningstar.com）的五星评级。荣获这两项评级对莱恩斯来说意味着什么？
Lyons won the lipper award and ranked 5 stars by morning star, what does that mean for lyons? What kind of impact do they have for lyons?
Sander·Read：It's a true honor to have won the 3 year Lipper Award for the Flexible Portfolio Group, which was over 130 different managers. Our win was based on our performance and consistency of rate of return. It was especially gratifying for a boutique firm of our size to beat some of the biggest names on Wall Street, including Guggenheim, JP Morgan, Morgan Stanley and Blackrock. That's no easy feat. What it means to Lyons is the proof of concept of a strategy that we put together as a team back in 2011 and 2012. The tactical space of the market was becoming more and more sector rotating ETF's and called for a concentrated equity portfolio with a slow tactical trigger. The combination of using Return on Invested Capital (ROIC) and Value in our screens has proven itself out with real performance that is award winning, and I couldn't be more proud of our team and the results of our programs.
Generally speaking, what kind of return of a fund will satisfy clients?
Sander·Read：As I mentioned above, there are a lot of different kinds of funds, some passively managed, some actively managed. In the United States, there are just as many different kinds of funds as there are people, it seems. It's really important to match time frames and risk tolerance with each individual. I do think our fund is a better alternative to the S&P 500 for it's stock picking, concentration, and potential to side step market declines. I think a fund that does what it says in the prospectus and stays true to its style and risk parameters should be satisfying to clients.
Since inception, how is lyons performance? Among all other fund companies , how do you rank Lyons?
Sander·Read：See latest stats but since inception I believe we are up a compounded 58% cumulative return. We rank number one in the flexible category with Lipper, but range from two star to five star with Morningstar because I believe they have us in the wrong category. Morningstar has us in the large cap blend category even though it says Tactical in our name and in our prospectus. So we should be in Morningstar's Tactical Allocation category, where I believe we would be number one.
As a fund company, we are relatively small, but have done a great job despite our size. We have beaten many companies that have dozens of analysts and research people. So we pack a big punch for our size but have delivered great performance and service over the years.
Among different funds and fund companies, what are the main aspects do they compete with each other? What kind of funds and fund companies do you think is sustainable and will be able to survive in the long run?
Sander·Read：Competition among fund companies is pretty fierce. I think many companies specialize in particular areas of the market and strive to become the best in that area. We are in the tactical space with different cap sizes, and we can compete in that area. But some companies try to do everything and that's usually where things go wrong. Also, performance and service are important. Firms that don't perform or don't give good service tend to fail. There also has to be a bit of what I call market vision, which is the ability to "see" or forecast major trends in the markets. Picking the wrong direction can be very bad for a fund company.
What is lyons core/main advantage?
Sander·Read：I think at this point our advantage is our performance, methodology, and the fact that we can go defensive where so many other fund companies won't. So if there is ever a market crash again, we give our clients a chance to side step that decline. The majority of equity funds in the world are long only, and I see no reason why they don't go down with the market the same way they did in 2008 and 2009. I actually find this market eerily similar to 2007, including odd pockets of real estate speculation showing up.
What areas/markets do Lyons invest/manage? What strategies?
Sander·Read：Lyons fills out the equity portion of the asset mix pie chart with all three major asset classes. We have large cap, mid cap and small cap. So you have exposure to all cap sizes. Both the large and small cap go defensive from the same QRI trigger, so if you used our funds and we went defensive, you would instantly go from being long equity to long US Treasuries in a significant market decline in which our tactical shift occurs. Our mid cap program uses options to hedge against market declines.
What is the most competitive strategy Lyons offer? What are the main characteristics?
Sander·Read：I think if you read our brochures you can get an idea of the main characteristics of our strategies. We are systematic, model based stock selectors of relatively concentrated portfolios with the ability to tactically shift to a defensive position in market declines.
What is Lyons strategy(bench mark ect) on stock picking? What is Lyons preference in terms of stock picking?
Sander·Read：The two major benchmarks that we use is the S&P 500 and the Lipper Flexible Portfolio category, which one could argue is also our peer group. We prefer being compared to the Lipper group or Morningstar Tactical Portfolio groups as our benchmarks. S&P 500 is not a very good benchmark for us because it's not concentrated and its long only.
After execution on buying a stock, under what circumstances lyons take profit/stop loss?
Sander·Read：Each stock in our portfolios has to stand up to the model screening that I discussed about. If the ROIC (return on invested capital) and/or relative value changes the ranking of a stock relative to the other stocks in our portfolios, then the stock is sold. Stocks are bought and sold using the screens and are equal weighted in the portfolios. In the small cap portfolios, we though we technically only rebalance annually, we monitor stock on a daily basis. And big changes as the stocks relate to the portfolios can cause it to be sold and replaced with another candidate. All positions are constantly monitored by our trading and research team.
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