2013 Portfolio Review and the Year Ahead

In 2013, the global large cap portfolio generated a net return of 29%. This compares favorably to the MSCI EAFE return of 19.42%. 2013’s return earned by the global account surpassed the DJIA return of 26.5% but was slightly lower than the 29.6% return generated from holding the S&P 500.

For 2013, the portfolio turn was 3.22%, modestly lower than prior years. The only transactions were a voluntary tender offer for shares of PVD as well as the reinvestment of cash dividends. Per long standing policy, the global portfolio is fully invested through all market cycles.

The portfolio was founded on July 18th, 2000. $1 million invested at that time had grown to $11.748 million on December 31st, 2013, net of all fees and expenses. From inception, the compounded average annual return now exceeds 20%.

The global large cap portfolio assesses its returns against not only the passive MSCI EAFE but against an august group of peers. Periodically, investment media compare this author’s work to notable publicly traded mutual funds. The 16 fund sample includes a cross section of large cap domestic US funds as well large cap international funds and several low turn mid cap global funds. The average return for the group was 25.54% in 2013. Several of the funds used in the peer appraisal process have turned up, yet again, as Morningstar International Fund of the Year Candidates for 2013


Active or passive management for 2014?

The year 2013 was marked by a largely indiscriminate movement to equities. My 16 peer funds reported a very sharp drop in their average turn ratios for 2013; little activity was required to capture a historically above average return. For most investors, be they retail oriented accounts or institutionally driven accounts, the driving motivation of 2013 was to maximize their rewards.

Given the recent increase in ten year US treasury bond rates to a level of 3%, there may be a slightly more cautious outlook moving to the equity markets for 2014. The proverbial throwing of darts at a wall might not prove to be as advantageous in the year ahead. Nevertheless, a positive wealth effect may continue to boost animal spirits in the marketplace for at least part of 2014. Both active and passive pundits will find plenty of supporting data to promote their various causes in the year ahead. My view is that global equity markets have the potential to earn a return roughly half that of 2013; I remain sanguine about the health of the overall global economy at the present time.



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