Dave,
I read yours and Scott's posts with a chuckle. The risks and returns you and Scott are assessing are by AB’s own admission “science fiction” (their so-called rocket science applied to create fictitious portfolios).
Scott describes them in various posts as “our” returns or “our” portfolios. This is deceptive. The portfolios are
NOT representative of either the risk levels or returns AB clients have actually achieved during those periods. AB has only been around about a year and a half and their fictitious portfolios have under gone at least one significant revision during that brief period.
What Scott is apparently referring to but fails to adequately disclose is what they do represent. The portfolios displayed on AB’s site represent the risk levels and returns for funds and asset mixes, which in retrospect, AB would have preferred they own with the benefit of hindsight. That is, he is referring to the performance of fictitious portfolios constructed with the full knowledge of how both the asset classes and funds
HAD performed after-the-fact, or a process known as “back testing.” His failure to disclose this is misleading and implies AB performance is much better than it is.
AB’s disclaimer identifies their model portfolios as
“fictitious” which the dictionary defines as "not true or genuine, intended to deceive, or invented by someone’s imagination."
Scott claims AB’s portfolios beat 80% of all managed accounts in early testing. Unless his performance claims represent the actual results of AB’s clients, and were audited and prepared in accordance with AIMR standards, it is merely a case of what the SEC describes as “exaggerated performance claims,” common with new start-ups.
I and others would certainly welcome Scott’s promised transparency and trust my observations were helpful highlighting some useful places to start.
Rick
