Resilience, or the grace and power to recover, is by many accounts the single most important quality in aging prosperously and well.

As we get older, we start to see the core of resilience is what resilience gerontologists – these are the people that study resiliency in the elderly – and one of our recent speakers, futurist Andrew Zolli, called narrative openness.
That means understanding that our story is not over; that we are still the protagonists of our own novel and that there still may be twists and turns in the plot. In short, it’s a heck of a lot easier to land on our feet if we are prepared for a fall.
Investors able to bounce back from the Great Recession had generally maintained a balanced asset allocation that allowed them to maintain their lifestyle as they waited for the market to recover. Some fell harder, including those who had invested with Bernie Madoff. The appeal was all too obvious – who wouldn’t want to see their money compound at 10% a year? – and many of his investors had allocated 50% or more of their assets to his investment program. Their lives were forever changed. So too were many of those who bet the farm on Internet stocks in the late 1990s or in collateralized mortgage obligations in the run up to the collapse of Lehman Brothers in 2008.
Time will tell how some of today’s high-wire strategies pan out, including stretching for yield by extending credit qualities or maturities, and buying high dividend-paying stocks regardless of their fundamentals. We also have to wonder how much risk there is in purely passive portfolios, in the wake of massive asset flows to indexed funds that have inflated the biggest stocks. (See the article by our Chief Investment Officer John Apruzzese here.)
Not everyone shares this perspective. A client left us recently to move his assets to a 100% passive equity strategy: making a leap of faith in the continuing growth of the fastest rising major sector of the market since the Great Recession, without any corresponding diversification into other asset classes. He was attracted to the low fees and turned off by the prospects for bonds. (See the article by Brian Pollak and Howard Cure that outlines our view of the bond market and makes the case for maintaining an allocation to the asset class here.)
While a 100% allocation to passive equity might be a reasonable solution for some endowments, or for an institution with a perpetual investment time horizon, or, for that matter, Messrs. Buffett and Gates, we fear that it is not the right solution for most high net worth individuals and their families. Most of us will need to withdraw funds from our accounts to maintain our lifestyle at some juncture in the market cycles.
An index-only growth strategy presupposes that public equities have the highest return potential of all the asset classes. However, after a 7.5% annualized return for the S&P 500 over the past ten years, we believe that well-chosen private equity investments will produce returns that are between 30% and 50% higher than the S&P index going forward, more than compensating this and other qualified investors for the lack of liquidity in this one asset class.
We construct resilient portfolios intended to limit drawdowns and to produce reasonable risk-adjusted returns, in all market conditions. Each of us has only one life, and we had better be prepared to live it well, regardless of the market’s next move.
Jeff Maurer is the CEO of Evercore Wealth Management and the Chairman of Evercore Trust Company, N.A. He can be contacted at

Evercore Wealth Management, LLC ("EWM") is an investment adviser registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. EWM prepared this material for informational purposes only and should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. It is not our intention to state or imply in any manner that past results are an indication of future performance. Future results cannot be guaranteed and a loss of principal may occur. This material does not constitute financial, investment, accounting, tax or legal advice. It does not constitute an offer to buy or sell or a solicitation of any offer to buy or sell any security/instrument, or to participate in any trading strategy. The securities/instruments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Specific needs of a client must be reviewed and assessed before determining the proper investment objective and asset allocation which may be adjusted to market circumstances. EWM may make investment decisions for its clients that are different from or inconsistent with the analysis in this report. EWM clients may invest in categories of securities or other instruments not covered in this report. Descriptions provided in this material are not substitutes for disclosure in offering documents for particular investment products. Any specific holdings discussed do not represent all of the securities purchased, sold or recommended by EWM, and the reader should not assume that investments in the companies identified and discussed were or will be profitable. Upon request, we will furnish a list of all securities recommended to clients during the past year. Performance results for individual accounts may vary due to the timing of investments, additions/withdrawals, length of relationship, and size of positions, among other reasons. Prospective investors should perform their own investigation and evaluation of investment options, should ask EWM for additional information if needed, and should consult their own attorney and other advisors. Indices are unmanaged and do not reflect fees or transaction expenses. You cannot invest directly in an index. References to benchmarks or indices are provided for information only. The securities discussed herein were holdings during the quarter. They will not always be the highest performing securities in the portfolio, but rather will have some characteristic of significance relevant to the article (e.g., reported news or event, a new contract, acquisition/divestiture, financing/refinancing, revenue or earnings, changes to management, change in relative valuation, plant strike, product recall, court ruling). EWM obtained this information from multiple sources believed to be reliable as of the date of publication; EWM, however, makes no representations as to the accuracy or completeness of such third party information. Unless otherwise noted, any recommendations, opinions and analysis herein reflect our judgment at the date of this report and are subject to change. EWM has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any such information becomes outdated, inaccurate, or incomplete. EWM’s Privacy Policy is available upon request. EWM is compensated for the investment advisory services it provides, generally based on a percentage of assets under management. In addition to the investment management fees charged, clients may be responsible for additional expenses, such as brokerage fees, custody fees, and fees and expenses charged by third-party mutual funds, pooled investment vehicles, and third-party managers that may be recommended to clients. A complete description of EWM’s advisory fees is available in Part 2A of EWM’s Form ADV. Trust services are provided by Evercore Trust Company, N.A., a national trust bank regulated by the Office of the Comptroller of the Currency and/or Evercore Trust Company of Delaware, a limited purpose trust company regulated by the Delaware State Bank Commissioner, both affiliates of EWM. Custody services are provided by Evercore Trust Company, N.A. The use of any word or phrase contained herein that could be considered superlative is not intended to imply that EWM is the only firm capable of providing adequate advisory services. This material does not purport to be a complete description of our investment services. This document is prepared for the use of EWM clients and prospective clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of EWM. Any unauthorized use or disclosure is prohibited. The Chartered Financial Analyst and CFA trademarks are the property of CFA Institute. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and CFP® in the U.S.

IRS Circular 230 Disclosure:

Pursuant to IRS Regulations, we inform you that any U.S. Federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for (i) the purpose of avoiding IRS imposed penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. This information is provided for information purposes only and does not constitute financial, investment, tax or legal advice.

©2016 Evercore Wealth Management LLC. All rights reserved.