My guest on Hedge Fund Radio this week is Lee O’Dwyer, a portfolio manager at 5T Wealth Management in the sunny climes of Napa, California. Lee is at the vanguard of a new wave of financial advisors sweeping the nation that is leading the way for individual investors during these difficult times, when everyone is seeking the “new normal”. O’Dwyer is cherry picking for his clients the best money management techniques that have evolved over the last 30 years, and discarding the dross.
5T Wealth Management is offering sophisticated hedge fund management trading and risk control techniques, that until now, have only been available to the big boys, and making them available to the retail investor. Their goal is to achieve absolute returns at all times and strive for every trade to be profitable. Relative performance benchmarked to an arbitrary index, such as the S&P 500, has been consigned to the dustbin of history. We are all traders now, whether we realize it or not. Buy and hold is dead. Unlike your past broker, Lee does not expect you to pay him a big bonus and take him out to lunch because he lost only 10% when an index dropped 20%.
To avail yourself of O’Dwyer’s considerable talents you need only open a custody account at a major house like Fidelity, Goldman Sachs, or Morgan Stanley. You then sign a third person limited power of attorney that enables 5T to execute trades on your behalf, but not withdraw any funds. As you can log into your account online at anytime, transparency is total and complete. The positions are there in all their glory for you to view and analyze at any time, for better or for worse. There are no black boxes, homemade account statements, or a “need to know” basis. The arrangement gives many individual investors all the security they deserve in the wake of the ugliness thrown up by the unfortunate Madoff affair.
For all of this, Lee charges the 1% management fee and the 20% performance bonus that is standard in the hedge fund community. A “high watermark” means that bonuses are only paid out on new net increases in asset values. This makes double dipping in a volatile market impossible. SEC rules limit 5T to accepting only accounts with a minimum size of $750,000 from investors with $1.5 million in liquid assets. The new financial reform act will stair step annual income requirements from $200,000 a year now, to $300,000 and $400,000 down the road.
Lee employs a global long/short macro strategy that scours the world for only the cream of investment opportunities. Long term, he likes commodities (NASDAQ:CU), food (NYSEARCA:DBA), (NYSEARCA:CORN), water (NASDAQ:PHO), other resource plays, and precious metals (NYSEARCA:GLD), (NYSEARCA:SLV). He is enamored with the currencies of the commodity producing countries like Canada (NYSEARCA:FXC) and Australia (NYSEARCA:FXA). He is very bullish on emerging markets, like the BRIC’s, as well as other new entrants such as Indonesia (NYSEARCA:IDX), Turkey (NYSEARCA:TUR), Chile (BATS:ECH), and Poland (NYSEARCA:EPOL).
On the short side, he is adamant that the 30 year Treasury bond (NYSEARCA:TBT) is reaching the end of an epochal bubble. Lee also thinks that rapidly deteriorating fundamentals and a coming demographic nightmare demand that the Japanese yen (NYSEARCA:YCS) is headed for a generational fall. In the US O’Dwyer likes technology, energy, and commodity plays, but doesn’t expect much from the main indexes for the coming decade.
Lee hales from England where he obtained a degrees from the University of Wales, focusing on international relations, economics, and accounting. He immigrated to the US in 1993 where he joined a major US hedge fund, learning every corner of the alternative investment business from the ground up. In 2007, he moved on to 5T Wealth Management, an SEC registered investment advisor based just outside San Francisco. During the 2008 financial crisis, Lee limited his maximum draw down to 15% when the S&P 500 crashed 58%. He quickly earned back losses during the rebound that followed, much to the delight of his investors.
As a result, 5T Wealth Management is rapidly attracting new investors, and today boasts $110 million in assets under management. You can learn more about Lee O’Dwyer and 5T Wealth Management by visiting his website at http://www.5twealth.com/ . To listen to my interview with Lee O’Dwyer in full on Hedge Fund Radio, and to gain a glimpse into the future of retail asset management, please click on the play arrow above.