Client mindset has changed. During the long bull run of the 1980s and 1990s, clients felt very comfortable with a buy-and-hold strategy. Regardless of whether it was ever a good idea, it was hard to knock-it was working. Now clients have been shaken up by two bear markets in the last ten years. They are more aware of global politics and of alternative asset classes. The world is a scarier place, and client have decided they need to be more active. According to a recent article in Smart Money:
In Jefferson National’s 2010 survey, 66% of advisors said clients were more confident with a tactical asset management strategy, while only 34% said clients were more confident with a traditional buy-and-hold strategy.
That’s a big change. The majority of clients are now more comfortable with a tactical strategy—the problem is that very few management firms embrace tactical allocation. (In fact, many of them have gone out of their way to ridicule it in the past.) There’s not a lot of proven product in the tactical allocation space because buy-and-hold was the mantra for the last 20 years.
It’s important to do your due diligence and find experienced managers with a robust strategy, whether it is relative strength or valuation-based. Both styles should work over time, but are likely to perform well at different points in the market cycle. (Of course, we are partial to the Arrow DWA Balanced Fund, a top-quartile fund with a five-year track record!)
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Posted by Mike Moody 
