We recently had the chance to speak with Citywire RIA1 about our Multifactor All-Weather investment program, which is a great example of the institutional grade investing that we believe sets us apart from other RIAs.
This is part of a series that Citywire is doing called “My Model Portfolio.” However, this nomenclature makes us cringe because what we offer at Mercer Advisors are “investment programs” and not “model portfolios”. Below we explain why we believe this distinction is an important one.
The multifactor all-weather program
Let’s begin with an overview of our all-weather program, which is designed to incorporate the latest academic investment research to systematically capture higher returns. There are a number of features of this program that make it state of the art.
First, we know that broad diversification, both across and within major global asset classes, is generally the path to lower expected risk and higher expected returns. To this end, we build multi-asset class portfolios that are broadly diversified.
Note for a moment that there’s nothing here in the science that concludes one investment vehicle is objectively better than any other – for example, ETFs versus individual securities. In our view, there are multiple ways to capture asset class returns – the most common of which includes ETFs, mutual funds, and broadly diversified pools of individual securities (commonly referred to as SMAs). What the science does conclude is that broader diversification is better than less.
Second, rather than rely on a purely passive or active approach, we use a hybrid approach that seeks to incorporate the best of both worlds: Factor investing, which uses a transparent, rules-based approach to help capture higher expected returns.
We know empirically from real-world data that techniques like stock picking, market timing, sector rotation, and related management techniques have poor track records; across all asset classes, the vast majority of active managers underperform their benchmarks and their track records actually get worse over time. The multifactor approach, honed over more than seven decades of academic research and real-world implementation, looks for quantifiable factors that have persistently (but not always) delivered excess returns over asset class benchmarks.
Third, we know that the broadest diversification cannot be achieved by investing in public markets alone. That’s why our all-weather investing programs include allocations to private markets. This can be implemented through investments in interval funds or, for investors that meet the SEC’s “Qualified Purchaser” definition, through participation in our Aspen Partners program.
An “investment program”
What separates an “investment program” from a “model portfolio” is the high degree of personalization that goes into implementation, which can look very different for everyone. As we indicated above, a well-designed, scientifically-sound investment program can be achieved using a variety of investment vehicles, which opens a lot of opportunities for personalization.
As you’ll see, this ends up being a big difference. Below are a few parameters along which an investment program at Mercer Advisors can be customized.
1. Program funding:
An investor’s starting point is a key consideration in how we implement our programs. Our investment programs may be funded using any combination of cash or legacy securities. As a basic example, many clients may come to us already with a legacy position in, say, an S&P 500 ETF. That position could have a low basis for tax purposes if it was purchased years ago. It may be the right decision to include that position in the new portfolio – that’s certainly likely to be preferable than selling it and realizing a large capital gain.
That’s a simple example, of course, but the technological capability to substitute positions in our programs can be extended to any combination of stocks, bonds, mutual funds, and/or ETFs. Other examples might include Coke for Pepsi, Apple for U.S. large cap core, and more. There is an almost infinite number of combinations to help personalize investment programs and facilitate the funding of our investment programs. The takeaway is that, unlike with traditional model portfolios, there is no need to necessarily sell legacy positions to fund a new investment program with cash.
2. Trade Logic:
Our investment program allows for some flexibility in our trade logic. Here’s why this can be important: An investment program’s trading logic can be set to sell first, sell last, or never sell legacy positions. It can also be set to buy more of the legacy position as part of rebalancing or investing actions. Investment programs can also be personalized with respect to rebalancing and dollar cost averaging.
Additionally, an investment program may be set to place specific do-not-buy or do-not-sell instructions for specific securities. (This capability may be especially important to those working for, or serving on the boards, of publicly traded companies.) We can also facilitate value-based screens or impact-investing tilts when requested.
There are many different reasons an investor may wish to do this. For one, these strategies can help manage the amount of capital gains recognized in a given year, which is the next major parameter on which we can customize strategies.
3. Capital Gains Budgets:
The only returns that matter are the ones you get to keep. This is a classic example of why our combination of unified in-house advice that includes tax planning, along with institutional-grade investing capabilities, can be such a powerful combination.
Our trade logic can be customized for each investment program to allow for very specific capital gains budgets. Budgets can be set as low as $1, effectively avoiding any realization of capital gains as part of any investing action. This capability is especially important when integrating an investment program with a client’s broader balance sheet that may have significant tax events occurring elsewhere, perhaps in private asset classes, the sale of a business, or the diversification of a large, concentrated stock position.
4. Vehicle Selection:
Our ability to build blended strategies consisting of any combination of our various asset class sleeves allows investment programs to be personalized along both asset class and vehicle dimensions. For example, a Mercer Advisors investment program can incorporate strategies like Separately Managed Accounts (SMAs) that own stocks directly to take advantage of tax-loss harvesting, ETF ladders for fixed-income exposure, or interval funds which give investors access to private markets while providing investors with some liquidity via periodic share repurchases. In short, an investing program has built-in flexibility to pursue advanced investing strategies in a way that’s often missing from a model portfolio.
5. Private Markets Implementation:
For investors who are qualified to invest in private markets, such as through our Aspen Partners program, the allocation should be implemented with careful planning. If a client and advisor determined, for example, that a 20% allocation to private markets was appropriate for your goals, liquidity needs, and risk profile, it would probably not be the right strategy to abruptly put 1/5th of your portfolio into private markets on the first day. There are advantages to building a private markets portfolio over a period of several years to help smooth out the distributions that will eventually come from different vintages of private market funds. This is another example of why an investment program relies upon building a careful strategy that’s right for you.
Key Takeaways
At Mercer Advisors, we prefer to talk about investment programs rather than model portfolios for a reason. We hope that understanding our thinking makes it easier to understand why the distinction is important.
- “An evidence-based approach…” We have designed our investing programs to utilize strategies with a strong evidentiary base verified by academic research – our multifactor all-weather program has features such as broad diversification, factor investing, and private market allocations. We are not chasing flashy fund managers with a few years of recent good performance but rather developing time-tested strategies.
- “… with institutional-grade investing…” Within this framework, we use our scale to continually negotiate for lower fees, and to improve our capabilities to facilitate strategies like private markets investing, or to help ensure strong partnerships with the managers who are best able to deliver the individual pieces of this strategy, such as those most skilled at implementing factor investing.
- “… to create a customized portfolio that suits each individual client.” We then use our investing expertise, and our capabilities with financial planning, tax planning, estate planning – all those professionals that comprise our unified in-house team – to deliver not just a portfolio, but a strategy to build a customized portfolio.
Click here for past insights about the impact of the election on markets and other interesting topics. Not a Mercer Advisors client but interested in more information? Let’s talk.
1 Foerch, Andrew. “My Model Portfolio: A contemporary 60/40 built for rain or shine.” CityWire RIA, February 10, 2025.
Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Investing in private markets is speculative and will entail substantial risks, including illiquidity. Private market investing is not suitable for all investors. Values based screen or impact investing tilts exclude certain securities/products for non-financial reasons, and therefore investors may forego some market opportunities available to those who do not use such criteria.
This document may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Mercer Advisors’ control.
Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning document preparation and other legal advice is provided through select third parties unaffiliated to Mercer Advisors. Tax preparation and tax filing are a separate fee from our investment management and planning services.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
Home » Insights » Market Commentary » Why We Talk About “Investment Programs” Instead of “Model Portfolios”
Why We Talk About “Investment Programs” Instead of “Model Portfolios”
Donald Calcagni, MBA, MST, CFP®, AIF®
Chief Investment Officer
We help families develop “investment programs” rather than “model portfolios.” Learn why the distinction between those two terms is important.
We recently had the chance to speak with Citywire RIA1 about our Multifactor All-Weather investment program, which is a great example of the institutional grade investing that we believe sets us apart from other RIAs.
This is part of a series that Citywire is doing called “My Model Portfolio.” However, this nomenclature makes us cringe because what we offer at Mercer Advisors are “investment programs” and not “model portfolios”. Below we explain why we believe this distinction is an important one.
The multifactor all-weather program
Let’s begin with an overview of our all-weather program, which is designed to incorporate the latest academic investment research to systematically capture higher returns. There are a number of features of this program that make it state of the art.
First, we know that broad diversification, both across and within major global asset classes, is generally the path to lower expected risk and higher expected returns. To this end, we build multi-asset class portfolios that are broadly diversified.
Note for a moment that there’s nothing here in the science that concludes one investment vehicle is objectively better than any other – for example, ETFs versus individual securities. In our view, there are multiple ways to capture asset class returns – the most common of which includes ETFs, mutual funds, and broadly diversified pools of individual securities (commonly referred to as SMAs). What the science does conclude is that broader diversification is better than less.
Second, rather than rely on a purely passive or active approach, we use a hybrid approach that seeks to incorporate the best of both worlds: Factor investing, which uses a transparent, rules-based approach to help capture higher expected returns.
We know empirically from real-world data that techniques like stock picking, market timing, sector rotation, and related management techniques have poor track records; across all asset classes, the vast majority of active managers underperform their benchmarks and their track records actually get worse over time. The multifactor approach, honed over more than seven decades of academic research and real-world implementation, looks for quantifiable factors that have persistently (but not always) delivered excess returns over asset class benchmarks.
Third, we know that the broadest diversification cannot be achieved by investing in public markets alone. That’s why our all-weather investing programs include allocations to private markets. This can be implemented through investments in interval funds or, for investors that meet the SEC’s “Qualified Purchaser” definition, through participation in our Aspen Partners program.
An “investment program”
What separates an “investment program” from a “model portfolio” is the high degree of personalization that goes into implementation, which can look very different for everyone. As we indicated above, a well-designed, scientifically-sound investment program can be achieved using a variety of investment vehicles, which opens a lot of opportunities for personalization.
As you’ll see, this ends up being a big difference. Below are a few parameters along which an investment program at Mercer Advisors can be customized.
1. Program funding:
An investor’s starting point is a key consideration in how we implement our programs. Our investment programs may be funded using any combination of cash or legacy securities. As a basic example, many clients may come to us already with a legacy position in, say, an S&P 500 ETF. That position could have a low basis for tax purposes if it was purchased years ago. It may be the right decision to include that position in the new portfolio – that’s certainly likely to be preferable than selling it and realizing a large capital gain.
That’s a simple example, of course, but the technological capability to substitute positions in our programs can be extended to any combination of stocks, bonds, mutual funds, and/or ETFs. Other examples might include Coke for Pepsi, Apple for U.S. large cap core, and more. There is an almost infinite number of combinations to help personalize investment programs and facilitate the funding of our investment programs. The takeaway is that, unlike with traditional model portfolios, there is no need to necessarily sell legacy positions to fund a new investment program with cash.
2. Trade Logic:
Our investment program allows for some flexibility in our trade logic. Here’s why this can be important: An investment program’s trading logic can be set to sell first, sell last, or never sell legacy positions. It can also be set to buy more of the legacy position as part of rebalancing or investing actions. Investment programs can also be personalized with respect to rebalancing and dollar cost averaging.
Additionally, an investment program may be set to place specific do-not-buy or do-not-sell instructions for specific securities. (This capability may be especially important to those working for, or serving on the boards, of publicly traded companies.) We can also facilitate value-based screens or impact-investing tilts when requested.
There are many different reasons an investor may wish to do this. For one, these strategies can help manage the amount of capital gains recognized in a given year, which is the next major parameter on which we can customize strategies.
3. Capital Gains Budgets:
The only returns that matter are the ones you get to keep. This is a classic example of why our combination of unified in-house advice that includes tax planning, along with institutional-grade investing capabilities, can be such a powerful combination.
Our trade logic can be customized for each investment program to allow for very specific capital gains budgets. Budgets can be set as low as $1, effectively avoiding any realization of capital gains as part of any investing action. This capability is especially important when integrating an investment program with a client’s broader balance sheet that may have significant tax events occurring elsewhere, perhaps in private asset classes, the sale of a business, or the diversification of a large, concentrated stock position.
4. Vehicle Selection:
Our ability to build blended strategies consisting of any combination of our various asset class sleeves allows investment programs to be personalized along both asset class and vehicle dimensions. For example, a Mercer Advisors investment program can incorporate strategies like Separately Managed Accounts (SMAs) that own stocks directly to take advantage of tax-loss harvesting, ETF ladders for fixed-income exposure, or interval funds which give investors access to private markets while providing investors with some liquidity via periodic share repurchases. In short, an investing program has built-in flexibility to pursue advanced investing strategies in a way that’s often missing from a model portfolio.
5. Private Markets Implementation:
For investors who are qualified to invest in private markets, such as through our Aspen Partners program, the allocation should be implemented with careful planning. If a client and advisor determined, for example, that a 20% allocation to private markets was appropriate for your goals, liquidity needs, and risk profile, it would probably not be the right strategy to abruptly put 1/5th of your portfolio into private markets on the first day. There are advantages to building a private markets portfolio over a period of several years to help smooth out the distributions that will eventually come from different vintages of private market funds. This is another example of why an investment program relies upon building a careful strategy that’s right for you.
Key Takeaways
At Mercer Advisors, we prefer to talk about investment programs rather than model portfolios for a reason. We hope that understanding our thinking makes it easier to understand why the distinction is important.
Click here for past insights about the impact of the election on markets and other interesting topics. Not a Mercer Advisors client but interested in more information? Let’s talk.
1 Foerch, Andrew. “My Model Portfolio: A contemporary 60/40 built for rain or shine.” CityWire RIA, February 10, 2025.
Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy or product made reference to directly or indirectly, will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance and results of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Investing in private markets is speculative and will entail substantial risks, including illiquidity. Private market investing is not suitable for all investors. Values based screen or impact investing tilts exclude certain securities/products for non-financial reasons, and therefore investors may forego some market opportunities available to those who do not use such criteria.
This document may contain forward-looking statements including statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Mercer Advisors’ control.
Mercer Advisors is not a law firm and does not provide legal advice to clients. All estate planning document preparation and other legal advice is provided through select third parties unaffiliated to Mercer Advisors. Tax preparation and tax filing are a separate fee from our investment management and planning services.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the CFP® certification mark, the CERTIFIED FINANCIAL PLANNER™ certification mark, and the CFP® certification mark (with plaque design) logo in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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