Mr.Ruth: I am Chief Investment Officer of Comerica Asset Management, a division of Comerica Bank. We are responsible for the investment management and investment policy for high net worth individual investors, foundations, endowments and occasional institutional investors. We also provide asset allocation guidelines and investment research for our brokerage affiliate Comerica Securities.
TWST: Let's start by talking about these trying times and the turmoil in the
markets over the last year. How has that impacted your investing strategies?
Mr. Ruth: We've always been focused on the quality of our underlying
investments. We like to look at our stocks as ownership of businesses, not
trades in speculative trends or themes of the month. From that perspective, our
focus on quality helped us to a certain degree. Although we, like everyone else,
knew there was a subprime lending problem, we had no idea it was going to take
down virtually everything with the exception of US Treasuries during the August
through November time period.
That being said, we held up a little bit better, but the takeaway from this is
that investors' risk tolerances have certainly been dialed back and we think it
will be quite some time before memories fade. The appetite for the types of
risks that you previously saw is significantly reduced, whether it be investors
who were 100% equities or investors who thought they were diversified by having
real estate, private equity and venture capital investments. Alternative
investments, as we now know, turned out to be very illiquid during the liquidity
crisis/credit crunch that occurred last fall and, to a certain degree, is still
with us today. Quite frankly, straight diversification across asset classes
wasn't a panacea for protecting portfolios.
Again, even if we had a well diversified stock, bond and alternative investment
portfolio, there were enormous liquidity discounts priced into many specific
holdings. The spreads on TIPS, municipal bonds and good quality corporate bonds
all widened dramatically. All the rules were thrown out. Even gold suffered in
what became a giant margin call during the worst of October and early November.
Gold worked well for a big chunk of 2008, particularly in the first half, but it
became a source of liquidity as margin calls were coming in fast and furious. My
takeaway, truly, was that the margin clerks were calling the shots for the
entire investment industry during the worst of last fall.
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.