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Beam Capital Management Launches First Blockchain Focused Investment Strategy in a Separately Managed Account

January 2, 2018

NEW YORK–Beam Capital Management, LLC, a new York-based registered investment advisor, announced today that it has launched the Blockchain Leaders SMA™, a separately managed account strategy focused on investing in the publicly traded securities of companies utilizing, developing, facilitating or investing in Blockchain technology. Mohannad Aama, CFP®, FRM, Beam Capital Management’s Chief Investment Officer will serve as portfolio manager.

“We are delighted to introduce this pioneering strategy to the separately managed account market. Blockchain technology has the potential to disrupt several industries. We expect the universe of publicly traded Blockchain stocks to significantly increase in 2018 and beyond,” said Mohannad Aama. “We believe that a professionally managed separately managed account offers easy access, transparency, liquidity, and control – 4 essential aspects of investing that individual and institutional investors value the most – particularly when it comes to investing in a new and potentially disruptive technology”.

The BLockchain Leaders SMA™ will not directly invest in Bitcoin, Bitcoin Futures, digital currency or other coin offerings. It will invest in publicly traded companies that are part of the growing Blockchain ecosystem.

The BLockchain Leaders SMA™ will commence trading on January 2nd, 2018 and will be initially available to new and existing individual and institutional clients of Beam Capital Management as well as to other Registered Investment Advisors who also use TD Ameritrade Institutional to custody their clients’ assets. TD Ameritrade Institutional and Beam Capital Management are separate and unaffiliated entities.

About Beam Capital Management

Established in 2003, Beam Capital Management LLC is a Registered Investment Advisor located in New York City and registered with the State of New York. For more information about Beam Capital Management, please visit https://www.beamcap.com

There are fees and risks associated with investing in separately managed accounts. For fees charged and risks involved in connection with the BLockchain Leaders SMA™, please refer to the Beam Capital Management website. Past performance is no guarantee of future results.

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The number one shortcoming that all money managers suffer from and what should investors do to mitigate its impact

buy-sell-80

Asset owners deal with money managers of all types. There are fundamental managers who rely on internally generated research, quantitative managers who build sophisticated algorithms, and then there are those managers who rely mostly on technical analysis by looking at chart patterns (there are more managers in this group than care/dare to admit). There are obviously some other types of investment managers but these 3 categories cover a great majority of money managers out there.  Yet, all of these managers share a common trait and it is overconfidence.

By definition, fundamental managers are overconfident in their abilities to uncover and interpret information relative to other investors. Quantitative managers claim that the lack of emotions that is the hallmark of their automatic model-driven trading makes them superior to fundamental managers. However, their shortcoming is that they are overconfident in the robustness and adaptability (current and future) of their algorithms in a constantly evolving market. What may have worked in the past, whether due to chance or skill, may not work in the future nor is it guaranteed that a quant manager’s new tweaked models will. Technical analysts are not only overconfident that future chart patterns will imitate, or at least rhyme, with the past but that it will when they think it will.

So, if overconfidence is so universal among money managers then what should asset owners do? The answer is simple. It is to focus on what will happen when a manager’s strategy goes wrong rather than what will happen when it goes right. It is to focus on a manager’s risk management strategy and the tools used to mitigate losses. As a student of financial risk management for the past 15 years, I can tell you that most practitioners and a big deal of the literature on the subject focus far more on risk measurement than risk management. Whether it is using sensitivity analysis, scenario analysis, back-testing or coming up with measures such as VAR, or value at risk, all of these techniques primarily predict what could happen (primarily given the past) but don’t tell you what to do when you actually experience a predicted, or as often is the case, unpredicted loss. Granted, you have to measure something in order to manage it but confusing measurement with management gives a false sense of assurance.

I will explain what I consider to be a proper risk management framework in a future post but what I can tell you from my 13 years as a money manager that any robust risk management framework will have 3 key anchors: 1) identifying and quantifying the proper downside risk you are willing and able to take, 2) having positions that will be profitable when your thesis is wrong in a magnitude that reduces the volatility of your returns, and 3) having optionality in your portfolio.

So to conclude, asset owners should expect that money managers they hire will have a certain degree of overconfidence. They should make sure that those they hire have a robust, reasonable, and actionable plan that mitigates losses and that their risk management strategy is not only one of a theoretical framework that hopes to predict the magnitude of potential losses. Money managers should realize this shortcoming and have a framework that will mitigate losses and assure clients.

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Beam Capital Management launches free 401k education portal 401kTutor.com

 401k educational & investing tools are now needed more than ever

NEW YORK, Jan. 7, 2016 /PRNewswire/ — Beam Capital Management announced the official launch of its unique 401k education website 401kTutor.com. The new website is free to use and offers custom 401k asset allocation models, reminder alerts to re-balance, and an innovative 401k education section dubbed ‘401k University’. Read more

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2016 Markets Outlook

2015 was characterized as a year with an uneventful first half that saw the S&P 500 trade within a narrow range from January to July before seeing a noticeable uptick in volatility in August through the rest of the year. It is important to remember that the month of August saw more than a 12% drop in the S&P 500 at its worst point. Nevertheless, the year ended flat for US stocks with the S&P 500 index declining slightly in price terms (-0.73%) but rising slightly (+1.38%) when you factor in dividends. Read more