Most of us are familiar with bull and bear markets, but Jesse Mackey, 34, believes there are two others we should be capitalizing on: eagle and wolf markets. Wolf markets occur when there's high volatility "but no real, clear trending direction to the upside or downside," said Mackey, chief investment officer of 4Thought Financial Group in Syosset. An eagle market "is essentially a bull market on steroids," with low volatility, no serious corrections and soaring asset prices.
Mackey started working under the name 4Thought in 2010 and went independent as a registered investment adviser in 2012. The new firm scored No. 1 in year-to-date performance in both the retirement income and multi-alternative categories of Morningstar's separate account research database.
4Thought's biggest area of growth is asset management for other advisers and institutions, such as Holbrook-based American Portfolios, that use the company to manage investment portfolios for their clients, said Mackey, introduced to the industry by his father, who has worked in the investment field for more than 30 years.
What are the best ways to invest in wolf and eagle markets?
A wolf market is where we tend to see opportunistic strategies perform the best. And in an eagle market, where you've got . . . investor exuberance in the marketplace, the selective or concentrated methods of a private equity-like investment tend to do the best.
What would be an example of opportunistic investing?
We'll measure the positioning of various types of assets relative to their long-term averages and determine whether those assets are substantially over- or undervalued, [and then] try to buy low and sell high. This year, Treasury inflation-protected securities have been a viable asset, with international developed-market stocks and emerging-market stocks.
What trends are you seeing that people can capitalize on?
This year, it has made more sense to have a global portfolio versus a more traditional U.S.-centric portfolio. You've got many of the returns from the global markets, from making investments outside the United States, both in international developed markets and in emerging markets.
How is your firm different from a robo-advisement firm?
When I hear the term robo-advisory, I think of online programs [where people never meet their adviser]. We actually do quite a bit of hand-holding with our clients, and we do employ advisers to work with the end-user client directly in face-to-face interaction, on the phone, etc. So, if when we're talking about planning for estates and business succession and talking about people's employment benefits and coordinating all of those aspects with their investment planning and portfolio management, that's not something -- as far as I'm aware of today -- that anybody's been able to do well in a pure robo-advisory format.
How do you get paid?
It depends on the type of work. If we're doing complex planning, that typically would involve a planning fee -- typically half paid upfront and half paid on delivery of recommendations, or an ongoing subscription fee for those purposes, if the situation warrants it. But the bulk of our revenues as a firm actually come from investment advisory fees or portfolio management fees. So we charge a percentage of the account value on an annual basis to manage the investment portfolio.
How do you help investors modify their market strategies?
We do multicontingency investment management, where we diversify people's portfolios not just in types of assets, but by using several completely divergent methods of investing. So we'll use liability-driven investing, typically used by large institutions, but we'll also use opportunistic investing, along the lines of what most hedge funds will use. And then we'll use elements of selective or concentrated investing. We believe by doing so, we can improve the probability that that investor will achieve their objectives.
Exciting things in the market right now?
The whole robo-advisory idea is exciting. It's disruptive. It's going to force the people in this industry to rethink their business models. And I think what we're witnessing there is some creative destruction. I think it's something that needs to be paid attention to.
On your web videos, you mention a formulaic approach. Is it a robo-investment kind of approach?
We have 18 different separate strategies - and each of those follows a formulaic process of what is essentially an algorithm. But the implementation of the algorithm is not necessarily by an automated computer process. The implementation is overseen by people who are actually monitoring the strategies and implementing them, so that, if we find that the strategy is broken, there's some way to improve it.
NAME: Jesse Mackey, chief investment officer, 4Thought Financial Group in Syosset
WHAT IT DOES: Wealth management and financial planning including estate planning, business succession planning, fringe benefits, investment planning and portfolio management.
EMPLOYEES: 13 full time, 1 part time