Latest news with #MorganStanleyPrivateWealthManagement
CNBC
01-08-2025
- Business
- CNBC
Morgan Stanley's Chris Toomey: Markets were due for pullback and jobs report was catalyst
Chris Toomey, Morgan Stanley Private Wealth Management managing director, joins 'Power Lunch' to discuss what to expect from markets the next few weeks, what the jobs data meant to the economy and much more.
CNBC
01-08-2025
- Business
- CNBC
Family offices turn to more structured pay to keep executives for the long term
Family offices are ramping up the war for talent, creating new incentive plans for top executives that are boosting pay, according to a new report. A majority of family offices are now using long-term incentive compensation plans, which increase total pay based on performance and investment returns, according to a report from Morgan Stanley Private Wealth Management and Botoff Consulting. Nearly two-thirds of investment-focused family offices are using long-term incentive compensation, according to the report. While family offices — the private investment firms of the ultra wealthy — have often given special performance bonuses to executives, the awards are becoming more structured and clear. "Over time, we are seeing an increased formalization of compensation plans," said Valerie Wong Fountain, managing director and head of family office resources platform and partner management at Morgan Stanley. "If you go back a number of years, you may have seen more handshake agreements. Now it's more structured and measured against performance." The Inside Wealth newsletter by Robert Frank is your weekly guide to high-net-worth investors and the industries that serve them. Subscribe here to get access today. At investment-focused family offices — which are more like in-house financial firms, with more specialized teams — the median total compensation for CEOs is $825,000 a year, according to the report. Larger investment-focused family offices, with over $1 billion in assets, are paying a median of over $1.2 million. Soaring pay at the very top of investment-focused firms has pushed average pay for $1 billion-plus CEOs to over $3 million a year, according to the report. Chief investment officers, or CIOs, are also benefiting. Median pay for investment-focused CIOs is now $900,000, with the average at $1.8 million. The incentive plans are also changing. Co-investments are becoming especially popular, allowing executives to invest alongside the family in deals. Since wealthy families often get special access to other companies and deals, the opportunity to invest alongside the family is an added bonus. The other common incentive plans include carried interest, where the executive gets a share of the investment gains beyond a benchmark, as well as phantom equity, profit sharing and deferred incentive plans.
Mint
01-05-2025
- Business
- Mint
Trump tariffs have shaken up markets. How investment pros are playing bonds now.
President Donald Trump's tariff offensive and other nations' responses to it have shaken up the bond market this year, sending yields on Treasury and muni bonds surging and widening the spread between yields on corporate bonds and Treasuries. So for this week's Barron's Advisor Big Q, we asked four fixed-income experts: What adjustments have you made to portfolios? Drew Zager, private wealth advisor, Morgan Stanley Private Wealth Management: We had held a TIPS [Treasury inflation-protected securities] position, and that had done well, and now yields on short TIPS are slightly negative, and so we sold those. We think that corporates are vulnerable, given everything going on with the economy and the trade war. So we have reduced our intermediate- to longer-term corporates, and those we still own are the shorter-duration corporates. We sold out of preferreds. We think they're probably fair value. There's a risk that we think is inherent with the economy and with a number of the financial institutions, particularly the regional banks. We think that Treasuries are probably expensive to fair value. But what we think is way too cheap are longer-maturity municipal bonds, either callable or not callable. Those are yielding north of 4%, tax-free. So depending on your state of residency, if you're in the top tax bracket, the tax-equivalent yield would range between 7% and 9.15%. Municipals have cheapened up for several reasons. It's tax season, when people tell their munis to pay their taxes. In addition, lots of people have margin calls on their stocks, and they don't want to sell their stocks, so they sell their bonds. You've got extreme uncertainty with Trump. And you've got lots of issuance. One reason for that is that lots of municipalities want to issue all they can right now because if something were to happen to munis' tax exemption, their costs would go up. So all that supply has caused munis to trade off, and right now they're about the cheapest they have been since 2011. Brian Huckstep, chief investment officer, Advyzon Investment Management: We reduced high-yield bonds toward the end of last year. We saw that credit spreads were getting tight. When prices go up for fixed-coupon bonds, yields go down. And when people are really comfortable with the market, they bid up prices for things like high-yield bonds, compressing spreads. When we saw that, we decided it was time to cut our high-yield holdings in half across our portfolios. We didn't forecast that something like tariffs was going to be happening, that the market was going to get the shock that it got, but just by virtue of watching valuations, seeing that the market was getting a little too comfortable with risk, we acted defensively. We pivoted into TIPS—Treasury inflation-protected securities—for inflation protection as the conversation about tariffs was starting. That has worked out for us pretty well. We're not making a whole lot of other moves. There are so many crosscurrents right now, especially on the long end of the curve. If inflation does flare up, that's typically bad for long term-bonds. On the other hand, when equity hits a rough patch and markets get risky, people take money out of stocks and put it into Treasury bonds, which increases prices for those bonds. The third current for long bonds is the question about what the government's going to do as the debt balloons. Many investors are getting concerned that the U.S. government might get another credit downgrade. And if that happens, it's bad for prices for long bonds. Kim Olsan, senior fixed-income portfolio manager, NewSquare Capital: We invest longer-term money. We're not looking at our fixed income as market timing in any respect. Over the past 25 years, the 10-year Treasury's average yield is around 3.25%, and we're currently a little more than 100 basis points above that, coming down from close to 5% over the past year or so. So historically, we would see the current market as opportunistic. On the taxable side, there has been a dislocation. Some people want to be defensive and move into money markets. So you get certain credit sectors that might pull back, like corporate bonds, and you may see some credit-spread widening. We've reduced corporate allocations in portfolios to some extent, bringing the overall percentage down 10% or so from where things were at the end of last year. In our model, we invest out to about the 10-year stated maturity date, with a duration of around four years. So within that one to 10 years, we're asking where have pockets of yield opportunity crept in, and how can we take advantage of them? So that might involve looking at categories like CDs, callable agency bonds, maybe some off-the-run govvies [Treasuries that are no longer new issues] where there isn't typically heavy flow but we can buy them a little bit cheaper and pick up some yield that way. Stephen Tuckwood, director of investments, Modern Wealth Management: We've not made any major tweaks in the midst of this market turmoil. That's a function of how we came into the year from a fixed-income standpoint, which was short duration and high up in quality. That's played out reasonably well, specifically given the reaction of fixed-income markets following the tariff announcement on April 2. Those few days following the announcement of tariffs there was a flight to quality, as we've seen historically, as Treasuries rallied for three trading days. But then something concerning did happen, where Treasuries then began to sell off. I think that was the signal to President Trump to ease off. And we obviously got the 90-day pause a few days after that. As we think about allocating to fixed income, there are two things we're looking for: income generation and diversification. And both of those things have come into question in different ways. We obviously went through a zero-rate environment for a long time, where the income was essentially not there but you still added some nice diversification. And then 2022 came around, where a 60/40 portfolio allocated to traditional fixed income didn't really provide the diversification benefit at all. So we have been looking for other diversifiers and sources of return to add to the portfolio versus public equities and fixed income. We're certainly interested in private credit. Spreads have widened a little bit, and of course, these are loans to smaller private companies, so there's some economic exposure, but private credit has been well-behaved so far. Write to
Yahoo
30-03-2025
- Business
- Yahoo
How the stock market's woes can spill over into the broader economy
The sharp decline in the stock market isn't just a problem for Wall Street. Main Street consumers can be spooked by market pain, leading them to cut their spending. Recent weak consumer sentiment data coincides with this year's steep sell-off in stocks. "The stock market is not the economy" is a common refrain. The thinking goes that while losses in the stock market may hurt Wall Street investors, Main Street is the real backbone of the economy. While that may be true, stocks are an important psychological lever and there is a threshold for losses, beyond which the pain in the market can spill over and hurt consumer spending. That's the thinking that underpins the concept of the "wealth effect," or the idea that rising and falling asset values have a material impact on consumers' spending habits. In other words, when the stock market rises and consumers see swelling investment portfolios, it instills confidence to keep spending even if their actual incomes haven't moved. On the flip side of that, losses in the stock market can curtail spending as people watch their wealth on paper decline. "I think this is the most important thing for people to understand that's unique about the US economy, is what we think we manifest," Sherry Paul of Morgan Stanley Private Wealth Management told CNBC this week. "We're a 70% consumptive GDP society so how we think and feel actually has a material impact on how we spend." With the S&P 500 down nearly 10% from its peak and having wiped out $5 trillion in value, it's no surprise that recent economic data has shown consumers starting to pull back on their spending habits. Retail sales dropped 1.2% in January, representing the biggest monthly drop since July 2021, and sales in February rose by 0.2%, much less than the 0.7% economists' forecast. While downbeat consumer sentiment and weakening data can be tied to the uncertainty coming out of the Trump administration, it is also likely affected by the plunging stock market. Kristina Hooper, chief global market strategist at Invesco, said in a recent note that the latest commentary from companies, including Macy's and Delta Air Lines, suggests a slowing economy, partly driven by wealthy Americans dialing back. "Affluent consumers in the US are likely to be reducing spending at least partially because of the substantial stock market drop, which has historically impacted perceptions of net worth and negatively impacted consumer spending," Hooper said. This highlights the broader economic implications of wealth perceptions that are influenced by stock market dynamics. Economist Mark Zandi of Moody's highlighted the same dynamic in a conversation with BI last week, warning that absent a quick rebound in the stock market, consumer weakness would likely persist. "The well-to-do are focused like a laser beam on their stock portfolios, and if the stock market shows a lot of red, they don't feel good and at some point they're going to pull back on their spending and that could be the fodder for a broad economic downturn," Zandi said. Stocks saw more red on Friday, with the Dow Jones Industrial Average plunging more than 700 points and the S&P 500 declining by 2%. According to market experts who spoke with BI, there's no clear answer as to how low the stock market has to go for there to be a negative impact on consumer spending. Instead, the real question is how long the stock market decline will last. "It's not so much a daily move or necessarily a percentage move in the market, but it's whether or not whoever is being impacted thinks that it's permanent so to speak," Thomas Martin, senior portfolio manager at Globalt Investments, said. Martin argued that the middle class could see the biggest pullback in spending habits amid a bear market. "I think at the very top, it probably doesn't influence people that much because they've got enough money that they're cushioned anyway, and at the lower end, they don't have wealth, so it's those middle quintiles that are the ones that are affected the most," Martin explained. To be sure, the stock market is not the only factor that can influence consumers' perceptions. Jamie Cox, managing partner for Harris Financial Group, said property values also play a big role. Cox argued that surging real estate prices over the past 15 years have "anchored" the wealth effect for most American homeowners. Perhaps most importantly, as long as Americans can hold onto their jobs, they are likely to remain resilient in their spending. "A stable job and rising home equity provide a more direct effect on consumption that the stock market, which, ironically is basically flat to slightly positive for most investors who have and have had diversified portfolios," Cox said. Read the original article on Business Insider Sign in to access your portfolio
