Morningstar Advisor - Summer 2008 - 68

Investments á la Carte $30K 25 20 MSCI EAFE TR 03 04 05 06 07 08 offering. For sure, this separate account owns plenty of well-known mega-cap names. But Overview by Michael Breen manager Wendy Trevisani and her team apply MF Julius Baer Global High Income BJBHX several tweaks that set their strategy apart. 18000 part of Trevisani earned her stripes working as $18K Bill Fries’ team at Thornburg International 16000 16 Value, a top mutual fund. This separate account 14000 14 shares much with that fund. For one, the LB Aggregate Bond TR portfolio is fairly concentrated. At just 45 12000 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Jun-08 holdings, it holds about one fifth the names that 10000 04 03 05 06 07 08 Sep-03May-04Jan-05 Sep-05May-06Jan-07country Oct-03 Jun-04 Feb-05 Oct-05 Jun-06 Feb-07 Oct-07 Nov-03 Jul-04 Mar-05Nov-05 Jul-06 Mar-07Nov-07 Dec-03 Sep-04 Jan-04 Nov-04 Mar-04 Dec-04 Apr-04 Apr-05Dec-05the Dec-06 Sep-07 Feb-06 Nov-06 Mar-06 fund’s Apr-06 Apr-07Dec-07 Feb-08 Mar-08 Apr-08 itsFeb-04 Oct-04 does.Jan-06 Sep-06May-07Jan-08 typical peer And Oct-06 May-05 Jun-05 Jul-05 Jun-07 Jul-07 and stock allocations share little with the May-08 An experienced manager and flexible mandate benchmark index. For example, the portfolio’s give this fund an edge. Although domestic junk 15% stake in telecom stocks is nearly three bonds correlate with the U.S. economy, this times the MSCI EAFE Index’s. Going its fund can spread its bets around. Veteran own way has paid off, and we expect similar Jan-03 Jan-04 Jan-05 buys low-rated corporate manager Greg Hopper Jan-06 Jan-07 Jan-08 long-term success here. The separate debt from the United States and abroad. He account certainly isn’t a wild child, but it’s Feb-03Nov-03Jul-04Mar-05 Feb-06Nov-06Jul-07Mar-08 Mar-03 Feb-04 Feb-05Nov-05Jul-06Mar-07Dec-07 Apr-03 Mar-04 May-03 Apr-04 May-05 Mar-06Dec-06Sep-07 Jun-08 Jun-03 May-04 Jun-05 Apr-06 Feb-07Nov-07 Jul-03 Jun-04 Aug-03 Aug-04 Jul-05 May-06 Apr-07 Feb-08 Sep-03 Sep-04 Aug-05 Jun-06 May-07 Apr-08 Oct-03 Sep-05 Aug-06 Jun-07 May-08 Oct-05 Sep-06 Aug-07 Oct-06 Oct-07 mixes in local-currency and dollar-denominated quirky enough to add some diversification Dec-03 Oct-04 Nov-04 Dec-05 Dec-04 Apr-05 sovereign debt and the occasional emergingto a portfolio. markets issue or busted convertible. The result is a nicely balanced portfolio that has performed well while providing diversification. Non-Market Correlated The portfolio has no correlation with the broad It’s not necessary to reinvent the bond market as represented by the Lehman wheel when diversifying your Brothers Aggregate Index. Lower costs would portfolio. Sure, a number of specialty be nice, but the fund’s 1% expense ratio is products have launched in recent below its category‘s average. have compounded nicely over time, that doesn’t help anyone make money. Here are a few straightforward securities from traditional categories that can add spice to your portfolio while still generating solid long-term returns. sate investors for the credit risk they court. (An ETN is a debt instrument issued by a bank, Barclays Bank in this case.) But there’s no other U.S.-listed ETF that tracks the Dow Jones-AIG Commodity Index, the benchmark that we think does the best job of balancing risk and reward by affording investors exposure to a wide variety of commodities, from lean hogs to crude oil. What’s more, unlike some other commodities baskets, the energy subsector doesn’t dominate the Dow Jones-AIG index, which caps subsector weightings at 34% of assets. Of course, commodities have been on a tear in recent years, making a correction—spurred by curtailed demand or other factors—a possibility well worth considering. Further, even a diversified commodities vehicle like this can be volatile at times; the ETN’s standard deviation has been roughly 1.5 times that of the S&P 500. But commodities are useful diversifiers, making this ETN a worthwhile candidate for investors willing to court the bumps along the way. K years that do a fine job at diversification. But some of these are more 14000 sophisticated than many investors 13000 need, and most are pricey. And 12000 remember, a low correlation 11000 between10000securities in your the portfolio isn’t a victory in and of 9000 itself. If a security goes its own way solely because it has steadily lost money or lagged while the major indexes and the rest of the portfolio E $14K 13 12 iPath Dow Jones-AIG Commodity DJP S&P 500 TR 06 07 08 We have misgivings about the price of this exchange-traded note, which we think ought to levy a lower expense ratio in order to compen- 68 Morningstar Advisor Summer 2008 Jun-07 Jul-06 Jun-08

Morningstar Advisor - Summer 2008

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