Tribes' investment strategy questioned
NEW YORK - American Indian children may be getting shortchanged because of the investment strategy many tribes use on funds being held in trust for minors.
Dean T. Parisian, chief investment officer of Chippewa Partners, Alpharetta, Ga., feels tribes that invest Minors Trust Fund money in stock portfolios managed by the ''relative'' method are doing a disservice to Native children, calling this ''a huge waste of money.''
The financial adviser and manager wrote in his blog recently that using the relative method rather than the ''absolute'' method ''is unnecessary and almost evil for the kids who need it the most and the vast majority of tribal asset managers haven't a clue of what I'm talking about.''
Parisian's firm uses the absolute method of investing, rather than the relative. According to www.guardianadvisors.com, relative returns ''are determined largely by movements in the market or in a particular industry sector,'' while absolute return strategies ''refer to investments that attempt to provide ongoing positive returns regardless of the performance of the stock market.''
In other words, a manager using the relative method would be happy if an investment performed as well as the general stock market, for instance. The absolute return manager would only be satisfied by generating the highest possible positive return.
Chippewa Partners uses the absolute method, according to its investment methodology statement, because ''our concern is not losing money. We don't want our portfolio down 10 percent when the market falls 25 percent.''
The relative return manager ''is still OK as long as his portfolio doesn't decline as fast as the market. Losing shareholder value isn't a problem for mutual funds as long as they don't lose it faster relative to a market decline.''
Parisian's firm uses the absolute method because ''clients engage Chippewa Partners to protect their assets and we are not in the business of losing money.''
In a separate recent blog, Parisian observed ''all of the stockbrokers over the years who have perpetrated fraud, misrepresentation and theft against Native American entities should be enough to fill San Quentin.''
He also warned that ''the hedge fund crowd is coming to a tribe near you.'' ''Funds of funds'' are ''the next bubble - the next way for financial market professionals to make a killing.''
Parisian noted, ''Recently we have found tribes that entrust their money to the big investment banks - Citibank, Chase, Merrill Lynch, or Morgan Stanley - which then invest it for them in hedge funds.''
The problem with hedge funds, according to Parisian, is that they are ''barely regulated'' and incur ''eye-watering risk.''
In fact, he concluded, hedge funds ''are a sophisticated way to lose money.''