THE FREEDOM UMA. Unified Managed Account Strategies

Transcription

1 THE FREEDOM UMA Unified Managed Account Strategies

2 Freedom UMA Effective investment planning cannot be left to chance. It requires research, consultation, planning, execution and constant monitoring. When financial conditions change, you should have confidence that your investments are supported by an institutional-quality process designed to constantly evaluate and balance risk and return, and a financial advisor who has a vested interest in your portfolio s success. If this is the level of quality that you demand, then the Freedom Unified Managed Account (UMA) may be right for you. Why Freedom UMA? I Diversification can be an important contributor to long-term performance. You and your financial advisor will work together to select a diverse strategy that best suits your individual circumstances, goals and risk tolerance. Freedom UMA offers more than 50 asset allocation models across six investment objectives to address your needs. I Utilizing institutional-quality techniques, portfolios are constructed with an allocation of multiple separately managed accounts (s). Mutual funds are utilized in particular asset classes to provide further diversification. I Regardless of the model you choose, the professionals of Raymond James Asset Management Services extensively screen and constantly monitor all and mutual fund managers in an ongoing effort to add value to your portfolio. I Although you ll be invested with multiple managers, you ll enjoy the convenience of one account and integrated performance reporting. I Ongoing annual rebalancing is designed to keep your asset allocation in line with your long-term objectives. Further information on the funds selected for the Freedom UMA portfolios is available by prospectus, which can be obtained through your financial advisor. Investors should carefully consider the investment objectives, risks, charges and expenses of the underlying funds before investing. The prospectus contains this and other information about the funds and should be read carefully before investing. Investing involves risk and investors may incur a profit or a loss. 1

3 Freedom UMA: Putting Diversification to Work As the old adage instructs, too much of anything can be bad for your health. The same could be said of your investment portfolio. Diversification spreading your investments across multiple sectors, asset classes and investment vehicles is designed to reduce various aspects of risk, including market volatility. Effective diversification can buffer your portfolio from downturns in particular segments of the investment universe. At the same time, diversification also seeks to expose your portfolio to a wide range of opportunities, increasing your prospects of generating enhanced returns without assuming disproportionate risk. Plus, with the Freedom UMA, your advisor won t need to open individual accounts with multiple s and mutual fund managers to meet your diversification needs. Raymond James overlay management feature, which handles all aspects of trading, provides your advisor the opportunity to conveniently factor in tax implications and apply trade restrictions. Diversification does not ensure a profit or protect against a loss. With s I You invest in the equities in your portfolio and will receive trade confirmations for securities transactions effected in your account. You can also retain your holdings should you decide to change investment platforms. I You have the option to impose reasonable trade restrictions on your portfolio. Talk to your advisor to determine whether this feature may benefit you. I You are not buying into a pool of shared holdings that may already have incurred tax consequences for the year. I You enjoy the flexibility to take tax losses when you and your advisor deem appropriate.* Mutual funds also play an important role in the diversification of the Freedom UMA models by more efficiently accessing specific asset classes and offering smaller allocation requirements. While no strategy guarantees success, the combination of separately managed accounts and mutual funds results in portfolios designed to meet all of your needs. UMAs are not suitable for all investors. It is important to review your investment objectives, risk tolerance, tax objectives and liquidity needs before choosing an investment style or manager. *You should discuss any tax matters with the appropriate tax professional. 3 4

4 The Benefits of an Institutional Approach Investors face what seems to be an ever-growing list of choices for their investment dollars. Advances in technology are combining with developing markets and sophisticated investment vehicles to bring a truly global marketplace to your doorstep. Making the best decisions for your particular situation is no easy task. Freedom UMA is designed to help. Grounded in our institutional-quality, four-step process for building portfolios and selecting managers, it s a powerful approach. Working closely with your financial advisor, you ll participate in a process similar to that used by many sophisticated institutions. The Four-Step Process Step 1 I Capital Market Assumptions Freedom UMA employs forward-looking risk, return and correlation assumptions based on economic data and indicators. These tools move beyond analyzing historical data and help avoid trend-chasing behavior. Step 2 I Asset Allocation Whether you are taking an aggressive or conservative approach to investing, Freedom UMA s advanced optimization process is designed to determine asset allocation models that seek to maximize return potential at various risk levels. The resulting portfolio options provide you strategies for reducing your portfolio s volatility in conjunction with your investment goals. Step 3 I Manager Selection and Portfolio Construction Freedom UMA treats portfolio construction as a distinct step in the investment management process. Asset allocations are populated by portfolio managers selected based on our confidence that they can consistently add value to a Freedom portfolio. Step 4 I Continual Monitoring Proactive performance reviews are essential to maximizing the flexibility of Freedom UMA. All managers are constantly monitored to determine whether organizational adjustments or investment process changes may affect performance. Capital market assumptions are continuously monitored and updated to maintain asset allocations we consider optimal. 4 5

5 Freedom UMA Models Conservative Balanced Model With Freedom UMA, your particular financial circumstances, goals and risk tolerance are reviewed to help determine which of the available asset-allocation models may be right for you. The models are spread among six different objectives ranging from conservative balanced to aggressive. You and your financial advisor will determine what s right for you. The model descriptions on the following pages illustrate Freedom UMA s six available investment objectives using asset allocation options for an investor with at 32% Domestic Fixed Income 32% International Fixed Income High-Yield Fixed Income 9% Global Real Estate (REITs) 4% Commodities 4% least $600,000 to invest. It s important to note that other asset allocation choices also may be available to this hypothetical investor, depending on goals, preferences and investment amounts. Some models are more heavily concentrated in a smaller number of s, while others are built with more asset classes and may include mutual funds. Again, your financial advisor will work with you to help you understand all 20% 4% 4% 9% Large-Cap Blend Equity 20% Small-/Mid-Cap Equity International Equity #1 of your choices. This strategy is suited for investors whose objectives are balanced between moderate capital appreciation and current income generation with consideration given to the moderation of volatility. The strategy consists of investing half the portfolio in diversified equity securities and half in fixed income securities. Investors who are considering investing in this model should have an intermediate time horizon and a moderate tolerance for risk of loss (volatility). UMA will receive a less-diversified portfolio. * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified 6 7

6 Balanced Models Balanced with Growth Models Domestic Fixed Income Domestic Fixed Income 11% International Fixed Income International Fixed Income 4% High-Yield Fixed Income 7% Global Real Estate (REITs) Commodities Large-Cap Blend Equity 29% Small-/Mid-Cap Equity 1 16% 3 17% 11% 4% 3% 19% 20% High-Yield Fixed Income International Small-/Mid-Cap Equity 3% Global Real Estate (REITs) Commodities Large-Cap Value Equity 18. International Equity #1 29% 7% 34% % Large-Cap Growth Equity 18. Small-/Mid-Cap Equity 17% International Equity #1 Domestic Fixed Income 3 Large-Cap Blend Equity 34% Domestic Fixed Income 20% Small-/Mid-Cap Equity 1 International Equity #1 16% This strategy is suited for investors whose objectives include moderate capital appreciation and current income generation with consideration given to the This strategy is suited for investors whose primary objective is capital appreciation with a secondary consideration given to the moderation of portfolio volatility. The Large-Cap Value Equity 20. Large-Cap Growth Equity 20. Small-/Mid-Cap Equity 20% moderation of portfolio volatility. The portfolio has a slight overweight to diversified portfolio consists primarily of diversified equity investments with a modest allocation International Equity #1 19% equity investments with the remainder of the portfolio invested in fixed income to fixed income securities. Investors who are considering investing in this model securities. Investors who are considering investing in this model should have an should have an intermediate to long-term time horizon and a moderate to high intermediate time horizon and a moderate tolerance for risk of loss (volatility). tolerance for risk of loss (volatility). * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified 8 9

7 Growth Models Aggressive Model International Small-/Mid-Cap Blend Global Real Estate (REITs) 7% Commodities Large-Cap Value Equity 16% 7% 26% 20% 6% 7% International Small-/Mid-Cap Blend 6% Global Real Estate (REITs) 7% Commodities Large-Cap Growth Equity Small-/Mid-Cap Equity 21% 18% Large-Cap Value Equity 18% International Equity #1 16% Large-Cap Growth Equity 18% Large-Cap Value Equity 21% 28% 26% 18% Small-/Mid-Cap Equity 26% International Equity #1 20% Large-Cap Growth Equity Small-/Mid-Cap Equity 28% International Equity #1 26% This strategy is suited for investors whose sole objective is capital appreciation through a full investment in diversified equity securities. Investors who are considering investing in this model should have a long-term time horizon and a high tolerance for risk of loss (volatility). This strategy is suited for investors whose sole objective is long-term capital appreciation through a full investment in diversified equity securities. This allocation may see a higher allocation to more volatile asset classes with the expectation of achieving higher returns over time. Investors who are considering investing in this model should have a long-term time horizon and a high tolerance for risk of loss (volatility). * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified 10 11

8 Equity Income Model Chart Your Progress Freedom UMA Model Allocation vs. Actual Allocation 28% As of December 31, 2008 Model Allocation Actual Allocation Domestic Fixed Income 28% International Fixed Income High-Yield Fixed Income 7% Equity Income Manager 60% 60% 7% ASSET CLASS ASSET STYLE MODEL ACTUAL DIFFERENCE Large Cap Growth 7.00% 7.59% 0.59% Blend 18.00% 18.97% 0.97% Value 7.00% % SMID Cap Growth 5.00% 5.32% 0.32% Value 5.00% 4.64% -0.36% International Growth 4.00% 5.54% 1.54% Blend 3.00% 4.01% 1.01% Value 4.00% 3.27% -0.73% Commodities 5.00% 4.02% -0.98% Real Estate 7.00% 5.89% -1.11% Fixed Income Domestic 16.00% 15.78% -0.22% International 5.00% 4.97% -0.03% High Yield 7.00% 7.14% 0.14% US TIPs 5.00% 4.63% -0.37% Cash 2.00% 2.00% 2.00% Total Market Value % % This chart is for illustrative purposes only. This strategy is suited for investors whose primary objective is dividend and interestincome generation with a secondary consideration for moderate capital appreciation. The strategy invests in equity* managers focused on securities that produce potentially above-average dividend yields coupled with an allocation to diversified fixed income Investors who are considering investing in this model should have an intermediate time horizon and a moderate tolerance for risk of loss (volatility). * Specific-sector investing, such as real estate, can be subject to different and greater risks than more diversified In addition to monthly brokerage statements, Freedom UMA investors are provided quarterly performance reports summarizing market activity, contributions and withdrawals from the day you open your account. These reports show you asset allocation and time-weighted portfolio performance data. Annual tax information will be provided on the end-of-year brokerage statement. With Freedom UMA, there are no traditional commissions just an annual fee based on a percentage of the assets under management. The Freedom UMA offers you an extra level of comfort knowing that Raymond James and your financial advisor have a vested interest in your success. * All investments are subject to risk. There is no assurance that any investment strategy will be successful. In a fee-based account, clients pay a quarterly fee, based on the level of assets in the account, for the services of a financial advisor as part of an advisory relationship. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. These additional considerations, as well as the Freedom fee schedule, are listed more fully in the Client Agreement and the Raymond James & Associates Schedule H Brochure. 12

9 THE FREEDOM UMA Unified Managed Account Strategies International Headquarters: The Raymond James Financial Center 880 Carillon Parkway I St. Petersburg, FL I Toll-Free: , Ext rjfreedom.com 2008 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC 08-AMS-0024 DS/RW 12/08