Track Record

It's important to realize that the effects of compounded returns cause seemingly small differences to accumulate into amounts that are rather significant for your lifestyle in retirement. Our help can have a very large impact on your ending wealth.

Ray Meadows, the investment manager and president of Berkeley Investment Advisors, has managed his personal portfolio for over 9 years. From 1999 to the end of 2008 his cumulative return was 209% compared to minus 15% for the S&P 500 index. (Click here for year by year details). As you can see, superior returns really can make an important difference over long time periods.

Looking at the long run is important because it is the erratic results in the short run that can lead to emotional decisions that wreck your chances for superior long run returns. Ray's conviction in his analytical abilities and investment skill allow him to stay the course and reap the rewards of his focus on business and economic fundamentals. After all, in the long run cash flows over-rule emotions in the investment world. Our strategies are designed to outperform over periods of longer than 3 years since it may take this long for fundamental factors to outweigh the short term emotional factors that drive the market up and down like a seesaw on a playground.

Client Portfolio Returns

At Berkeley Investment Advisors, we implement our investment strategies in a number of different risk portfolios which we allocate client money to according to their risk tolerance. Our primary equity portfolios are called Long Term Value (which hit its 4 year anniversary in March) and the Special Situations portfolio which came just a bit later. In January 2008 we initiated what we call the Hedge portfolio which we use to reduce the risks of the first two strategies under the current adverse market conditions. At that time we also moved a portion of client funds into some income oriented portfolios so that this money would be available to reinvest in the two main equity strategies once the risk of market wide losses is reduced to an acceptable level.

As shown in the section below, client portfolios had outstanding performance from inception in March 2005 up to October 31, 2007 when cumulative returns peaked at 56%. In January 2008 we put on hedges against further expected market declines. Consequently we did not lose money for the first 6 months of 2008. After that, the rapid drop in oil prices and very high volatility rendered our hedging instruments less effective than expected. Now that the drop in oil prices is reducing supply and dampening the drop in demand, this risk factor has become relatively less important. Furthermore, we have shifted to more effective hedging instruments to reduce the losses attributable to volatility. As a result, we have managed to gain 5.8% through the first half of 2009.

For the 4 years ended March, 2009 the first four clients to set up accounts, on average, earned an overall cumulative return of 3.8% compared to a loss of 30.4% for the S&P 500 over the same period.

The chart above plots the cumulative returns for the overall blended portfolio recommendation (for the average of the first 4 clients) over the 4 years ended March 31, 2009 as compared to the S&P 500 index. 

Client returns data includes reinvestment of dividends after netting out fees and expenses. Note that our client portfolios are much less diversified than the S&P 500 index and therefore exhibit higher short run volatility. As explained in the section on The Relationship of Risk to Investment Time Horizon, our view is that short run volatility is not an appropriate measure of risk of loss for long term investors.

In summary, our clients have managed to outperform the market in both up and down markets. Although cumulative returns to date are somewhat unimpressive on an absolute basis, by sticking with our strategy (but hedging more effectively) we are well positioned to withstand further declines and produce outstanding returns as the economy recovers.

The following table breaks down returns by calendar year.

Period 2005 2006 2007 2008 2009 4 year total S&P 500 6.2% 15.2% 5.1% -39.0% -11.3 -30.4% Avg. of 1st 4 Clients 21.8% 16.1% -2.4% -24.6% -0.3% 3.8% Difference 15.6% 0.9% -7.5% 14.4% 11.0% 34.2%

The big gain in 2005 was driven by a correct prediction of rising energy prices and some good real estate picks. In 2006 the portfolio lagged the overall market significantly – energy prices stalled out for the year. A surprise Canadian tax increase on energy trusts also took a chunk out of returns that year.  By contrast, 2007 saw further big gains in energy prices which helped the portfolio post strong returns but the impending recession induced by the credit market problems pulled our portfolio down along with the rest of the market in November and December. The result is that our energy positions were priced as if oil had already fallen. 

In 2008, energy prices are in fact rising, not falling – this in spite of a U.S. recession which probably began in January. As a result, the portfolio lost very little value up to its anniversary date of March 17th while the S&P lost more than 12%. These results are consistent with the assertion that the portfolio's value investing focus reduces the risk of large declines in value over longer time frames. Given the portfolio's 5.4% dividend yield, this portfolio can generate positive returns in 2008 even if stock prices don't move; this should lead to much better results than the S&P 500 in a bear market environment. 

Phone: 510-367-3280 or E-mail