We've written about Ecuador quite a few times as an expat destination but over the last year or so the news seems to be getting worse. I have no idea what the reality on the ground is but it started with protests in Quito, then gang-related violence and the latest is an energy crisis that is leading to rationing. I'm pretty sure that in every post about spending part of retirement in a foreign country I say to keep your house in the US and rent it out in case you need to come back. I don't know whether expats should be leaving Ecuador or not but this sort of sequence of events is exactly what I have in mind about being able to come back. If you sell your house to move to another country, the odds of being permanently priced out from coming back are pretty high.
Barron's reported on a proposed change to the fiduciary standard related to when people leave companies and how or if they should roll their 401k over into an IRA. The intent is to help people from getting conflicted advice. It appears to be more focused on annuities than rollover IRAs.
The commissions on annuities are usually enormous. I am aware of one inexpensive annuity offered by Vanguard for anyone really wanting an actual annuity. I am not licensed to sell annuities and I've never sold one to anyone. Despite my bias against annuities as insurance products, I am open to keeping tabs on products that annuitize income streams. I've written about the Stone Ridge mutual fund suite that does this. I've mentioned a couple of times that investment products that annuitize income streams are very likely to improve to the point of making more sense than annuities as insurance products. The Stone Ridge funds are an improvement but I think this niche can get better still which could help people who are undersaved.
It is not clear if this new rule would make it more difficult to rollover into an IRA. Yes there can be conflicted advisors, advisors who charge too much and there are advisors who do not know what they're doing. But as far as regulating this, no one has to hire an advisor, it's not leave it the company plan or hire an advisors, people can self manage.
I've said many times, this is all learnable for most people. There is a lot to learn, maybe less about portfolio construction because despite how inferior I think 60/40 and target date funds are, they are valid. Calling them inferior doesn't mean they are invalid. There's probably more to learn about Social Security and how to be smart, tax-wise, withdrawing from retirement accounts. If you don't want to hire an advisor, don't, just realize there really are a lot of mistakes to potentially make, it is worth it to invest the time needed to avoid those potential mistakes.
Leaving money in a 401k after you've retired is a terrible idea. There must be an exception to this rule but leaving it in a 401k is a woefully inferior choice. Ironically, one of my older brothers cannot wrap his head around this point. Free advice to everyone but my brother, roll it over! If this new rule would make that more difficult then they are hurting consumers not helping them.
Finally, there was a legitimately fascinating discussion on Bloomberg the other morning when Katie Greifeld interviewed Brett Winton from Ark Investment Management. The segment quickly turned a nerd fight over the better mousetrap for retail accessible venture investing. Earlier in the week, Bloomberg looked at the recently listed Destiny Tech100 (DXYZ) which is a closed end fund. Winton was on there to talk about the ARK Venture Fund (ARKVX) which isn't a normal mutual fund. It is what's called an interval fund which limits when and how much you can sell.
DXYZ came out of the starting blocks and immediately jumped to a massive premium to its net asset value (NAV). In debating the merits of the interval structure versus the closed end fund wrapper, Winton kept repeating paying $30 for "$5 worth of stuff." In less than one month of trading, DXYZ has traded between $8.25 and $105.00. Winton was implying the NAV is only $5, the market price closed Friday at $28.39. Whatever the NAV, Winton is close even if not exactly right, investments in things like Space-X or Cerebra, which don't trade publicly are not marked to market anywhere near frequently enough to correspond to DXYZ's volatility.
If the NAV is $5, DXYZ could drop 75% and still be trading a huge premium.
The interval format again limits liquidity, ARKVX is also expensive, it appears to charge 2.90%. DXYZ charges 2.5%. As for the fees, I don't know what a fair fee would be, maybe the 2.90% and 2.50% are very fair, but access to companies like the ones these funds own is going to be more expensive than the typical ETF or mutual fund.
DXYZ is uninvestible. The NAV could double and the market price could cut in half (both could happen simultaneously) and the fund would still be trading at a huge premium just like the 75% drop example above. If somehow you have to own the space, I guess the interval wrapper is better. Assuming no fraud, getting a dollar's "worth of stuff" for a dollar is better. Again though, getting your money out will take a long time.
I am not saying no one should own these, that's not up to me obviously, I just think there are other niches in the market where getting asymmetry or at least the opportunity outsized returns (the tradeoff is increased volatility so allocate accordingly) is cheaper, simpler and more accessible without the fees, gates and premium to NAV issue.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
No comments:
Post a Comment