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May 15, 2013
Board reviews its investment policy

Based on market performance and the expected rise of interest rates, Morgan Stanley, The Florida Bar’s investment advisor, is recommending revisions to the Bar’s current investment policy.

Ian Comisky Committee Chair Ian Comisky reported to the board at its recent Tampa meeting that the committee is working with Morgan Stanley to update the Bar’s investments to maximize return in the projected changing market environment.

“Morgan Stanley has come out with a seven-year projection of the world market. And the view is that sooner or later interest rates [which are near zero] have to go up,” Comisky said. “Interest rates can’t be near zero forever. When interest rates go up, normally a bond portfolio goes down.”

Consequently, the Bar must be careful in how much it has invested in medium- and long-term bonds, he said.

“Second, if interest rates go up . . . their view is inflation has to start picking up. And if inflation starts picking up, their view is that commodity prices will start increasing,” Comisky reported.

The committee, he said, wants to adjust Bar investments to accommodate those changes. Those modifications will also recognize that some market segments — large-cap funds, mid-cap funds, real estate investment trust funds — have performed exceptionally well in the past year, “and most likely that just can’t continue,” and the Bar needs to look elsewhere for growth.

Because of the expected eventual return of inflation and growth of the global market with the resultant increase in commodity prices, Comisky said the recommendation is to invest more in European and international investments and in emerging markets. He said the committee will present to the board at its May meeting how those reallocations should be accomplished to reflect the Morgan Stanley strategic outlook.

The committee already has approved some changes, but only those within parameters established in the current investment policy, Comisky said.

“The goal is to try to get a little more oomph” while still maintaining a conservative investment approach, he said.

[Revised: 10-07-2013]