Reiner: Beyond Bonds For Safe Retirement

February 25, 2014

You should own your age in income-producing securities, Wela Strategies’ Reiner says.

Mitch Reiner is head of the $1.3 billion wealth management firm that the ETF portfolio shop Wela Strategies grew out of. Today he is delivering ETF solutions to investors of any size. Wela has just $80 million in assets, but the unit is growing rapidly as it markets its asset allocation models to outside advisors.

At the heart of his practice is a focus on securing income, and he does so not only through bonds, but through a strategic multi-asset class allocation approach that’s designed to keep money trickling in no matter what the market does.

He recently shared with’s Cinthia Murphy his views on finding yield in a rising-rate environment. Your practice focuses heavily on income. How do you go about building your portfolios?

Mitch Reiner: We have two basic product suites. One is the “Own Your Age,” which is very simply based on what Jack Bogle would say about owning your age in bonds. Obviously, we know that’s probably not a very good strategy to own your age just in bonds, but the idea is simple: Own your age in income-producing, less aggressive investments.

As you get older, you tend to get more conservative. We’re using a target allocation so that you know exactly the exposure you have. It’s all about simplicity. If I own the “Own Your Age 40,” that means 40 percent of my portfolio is allocated to income-producing investments, most of which is in bonds, and 60 percent of it is tied to growth-type investments. We’re very strategic.

The other product we have is the income-focused “Agg Yield” strategy, which is kind of unique. With the proliferation of ETFs, we’ve been able to replicate at Wela what we were doing with individual securities at our wealth management firm.

I think aggregate yield is going to be key in the next decade of rising rates, however slow or fast they may actually go up. By that I mean combining different high-yielding asset classes together to get you a unique stream of income, which, regardless of what the market is doing day to day, will still provide a consistent stream of income. What types of securities go into the Agg Yield strategy?

Reiner: We’re combining bonds with closed-end funds, MLPs, REITs and preferred stocks. These are all asset classes that advisors know individually well. If you ask advisors what a preferred stock is, they can explain it. But it’s a matter of knowing how much preferred stock to own relative to REITs in a portfolio at a given time—not only as an asset class, but also more granularly, like owning technology stocks versus financial stocks. There is a time to own them when they’re fundamentally a good value, and times when they’re not.

As an example, MLPs were up 23 percent last year. So, to have that as a component of your income portfolio would have been a great hedge to bond prices. Knowing when to dial up and down the allocation to those specific asset classes is what we take off the plate of an advisor. We make those decisions.



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