The "lost decade" that opened the present American century will be remembered throughout history by two defining market crashes that shocked the global markets. For investor portfolios, the sudden and severe market declines that occurred in 2000-'02 and again in 2008 had a devastating effect upon retirement portfolio values, cash flows, personal net worth and investor confidence. The devastation of portfolio values could be measured in the "tens" of thousands and even "hundreds" of thousands of dollars for many investors.

Cash Flows and the Effect on Portfolios

The more troubling matter at hand for pre-retired "Baby Boomers" and those investors who had already committed to formal retirement was the matter of retirement readiness. The sudden and untimely decline of portfolio values meant that whatever planning formalities they had undertaken in order to "walk off into the sunset" had suddenly become compromised. For those fresh into retirement, the need for retirement cash flows had compounded the strain upon their portfolio values. Whatever "retirement readiness" had been perceived at the outset of the new century was no longer applicable, as overbearing market forces caused some to postpone retirement and others to reinvent their visions of how "retirement" would be experienced.

Unprecedented Challenges for Advisors

For financial advisors, the "lost decade" was equally as challenging. Long standing asset allocation models broke down, especially within the shorter investment time horizons (3-year, 5-year, and 10-year horizons) and no longer represented the investment return outcomes advisors had previously relied upon. With the highest quality bonds (Treasuries, Agencies, Municipals) yielding, at times during this decade, less than the U.S. economy's rate of inflation, the challenge of building investment portfolios that could grow (not diminish) as retirees began taking required minimum distributions from their retirement portfolios was astounding. For financial advisors, it was a "lost decade" indeed.

Unfortunately, many of the adverse market forces that presented during the early 2000's have not alleviated. And new economic risks and political challenges will continue to cause foreseen and unforeseen market volatility in the years and decades ahead. It seems there will always be another "bear market" just around the corner.

Fresh Solutions for Old Problems

Here at Lakeland Investor Services, the firm has developed a portfolio process for investors to consider implementing in the face of future "bear markets". The process may be  referred to as a "long-short" equity neutral portfolio strategy. The premise of this strategy is that during market crashes, shifting a portfolio from a position of "long" equities to a position of "neutral" equities (or even "near-neutral" equities) has the ability to dramatically lower a portfolio's "beta" and "standard deviation" risk measures. By making this shift in a timely manner, the portfolio sheds much of its exposure to the "systemic" risk that is inherent in global market forces during times of extreme market volatility.

"Long-short" equity strategies are not a new concept. Hedge funds and some of the more progressive fund managers have applied such strategies within their funds for many many years. In general, "long-short" strategies are not strictly limited to equity investing but can be utilized with other classes of investments (bonds, currencies, commodities, etc.). These strategies can also be utilized within asset classes (stocks, bonds, and currencies), market sectors, and even global regions.

But what is somewhat new with regard to implementing "long-short" type equity neutral strategies is the relative ease and cost effectiveness that can be realized in today's investment products marketplace towards moving into and out of equity neutral portfolio positions. With a wide selection of low-cost exchange-traded funds (ETF's) coupled with the low per trade costs of discount brokerages, implementing these strategies has become more readily achievable and more cost-affordable for investment advisors and their clients.

Like many investment strategies, "long-short" equity neutral strategies present certain risks for investors, such as Market Risk, Management Risk, and Timing Risk. However, finding newer and cost-effective ways to minimize the crushing losses that sudden and swift market crashes can deliver upon investment portfolios is the ever more resounding call to investment advisors as these unprecedented financial times proceed.

Bear Markets? ... Lakeland Investor Services can Help! ...

Lakeland Investor Services  is presently accepting new client families into the firm's portfolio management services. If you are interested in learning more about the firm's portfolio management services and Lakeland's approach to  "long-short" equity neutral investing during "bear" markets, and you would like to schedule a private consultation to discuss your investment portfolio, please click the link below. Mark will gladly schedule a no-cost, no-obligation initial consultation to review your circumstances and present the specifics of Lakeland's approach to portfolio management.

Click Here to request a no-cost, no-obligation consultation to learn more about the "long-short" equity neutral investment strategy.


The long-short “equity-neutral” strategy Lakeland employs during market downturns is an investing strategy that involves taking new/maintaining existing long positions in equities (mutual funds, exchange-traded funds (ETF’s) and/or stocks) that are expected to increase in value and owning short positions in equities (mutual funds, exchange-traded funds (ETF’s) and/or stocks) that are expected to decrease in value during normal market conditions, including the use of “short ETF funds”. The primary goal of the firm's long-short “equity-neutral” strategy is to maintain a lower beta exposure to the equity markets than would normally be realized in traditional long-only investment portfolios (which typically exhibit betas closer to 1.0). A lower beta means that the long-short “equity-neutral” portfolio will lag long-only strategies when equities are trending upward but should also hold up much better during periods of market turmoil. As such, this strategy involves certain risks, including market risk, management risk, and timing risk.  

Market Risk - This investment strategy is subject to market risk. Market risk is the risk that a particular security owned in the portfolio or the entire portfolio in general may fall in value.

Management Risk - This investment strategy is subject to management risk because it is an actively managed portfolio. In managing a long-short investment portfolio, the advisor will apply investment techniques and risk analysis that may not have the desired result. There can be no guarantee that the securities owned or the entire portfolio in general will meet its investment objectives.

Timing Risk - This investment strategy is subject to timing risk. Timing risk is the risk that an investor takes when trying to buy or sell a stock based on future price predictions and involves the potential for missing out on beneficial movements in price due to an error in timing. This could cause harm to the value of an investor's portfolio because of purchasing too high or selling too low.

Other risks may apply.

Disclaimer:  There is no guarantee that the long-short investment strategies Lakeland Investor Services employs will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the markets. Your investments may lose value during the employment of this investment strategy.