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California Advisor Tangled in Craigslist Defamation Scandal

Former Edward Jones advisor sues over fake Craigslist ads, relying on backtested data can be dangerous, and Envestnet-PMC offering long/short equity strategies.

According to a lawsuit filed in rural Northern California, Dalas Gundersen, a former Edward Jones broker, was targeted by disgruntled former colleagues in an Internet ”smear campaign." For 15 years, Gundersen helped build an Edward Jones practice with $150 million in client assets. Tension began when he was fired for failing to confirm trades with clients, a violation of company policy, and established a rival firm just a half-mile away. The case alleges that nine months later (in September 2015), Lisa Rodriguez and Paul Betenbaugh began posting illegitimate ads seeking sexual encounters with men, containing Gundersen’s phone number and physical description, as well as graphic statements, the Sacramento Bee reports. Edward Jones and Rodriguez denied any knowledge of the harassment, but Betenbaugh admitted to making two of the Craigslist ads and was fired in February 2016. “Lisa [Rodriguez] came to me very upset because a client of Dalas’ submitted a complaint letter to Edward Jones about Lisa … I became equally upset because this negative post could seriously damage her employment and client relations. Because of my anger at what happened to Lisa, and without Lisa’s knowledge, I took actions which were not honorable and determined to place a post on Chico Craigslist which would annoy Mr. Gundersen,” Betenbaugh admitted. The lawsuit is currently under way. In California, cyber-impersonation with the purpose of “harming, intimidating, threatening or defrauding” is punishable by up to a $1,000 fine and one year in the county jail, or both.

Beware of Backtesting in Smart Beta

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About two-thirds of smart-beta index track records are backtests, according to a new report by Research Affiliates. The firm also found that most live track records are no longer than 10 years, “which implies that much of the investment outcomes reported by smart-beta providers are from simulations,” the firm says. Relying on backtested data can be a dangerous proposition, the firm says, as live performance of smart-beta indices show virtually none of the outperformance shown in the backtest. “The big gap between simulated and live performance can be largely explained by two common forces dominant in backtests—overfitting (or data-snooping bias) and ignoring transaction costs—both of which effectively bias investors’ return expectations higher than may be realistic,” the report says. Investors should expect lower returns than that of the backtest, dig deeper into out-of-sample test results and implementation costs, and make investment decisions based on strong underlying economic theories.

Envestnet PMC Offering Hedge Fund Strategies to Financial Advisors

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Envestnet PMC is now offering financial advisors access to long/short equity strategies on the Envestnet platform through separately managed accounts. PMC is offering access to multiple alpha-generating long/short equity strategies spanning market capitalizations, geographic regions, market sectors and investment styles. Through these SMAs, investors can potentially enhance portfolio diversification and mitigate exposure to volatility. There are currently three long/short equity strategies as SMAs offered by PMC. "Long/short equity strategies have historically outperformed equity markets since 1990, while reducing downside risk, and we are proud to be able to offer these hedged approaches through the same type of SMA platform that large institutional investors have been able to take advantage of in recent years—but with lower minimums and greater control, liquidity and transparency for individual investors," said Brandon Thomas, Envestnet PMC's chief investment officer.

 

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