Brinker Capital's Charles Widger dares to push the limits

Charles "Chuck" Widger, 70, founded and is executive chairman of Brinker Capital in Berwyn, with $18 billion in assets under management. He's the latest professional investor to unveil for us his personal retirement portfolio.

First, Widger invests more aggressively than most retail investors. That's because he and wife Barbara want "to finance our family's lifestyle and our philanthropy after we're gone."

Rather than spend it down, they have to keep their portfolio growing beyond their lifetimes - for their children and charity.

Second, he says, you have to "figure out your key assumptions underpinning your personal investment strategy. For instance, I'm 70, and my life expectancy is 83. My wife's life expectancy is 93."

Widger uses his firm's multi-asset approach.

"We use six different asset classes. Traditional ones are domestic equity, international equity, and fixed income. Nontraditional asset classes include absolute return, real assets, and private equity. My strategy embraces all of them in my 401(k)," he says.

His personal portfolio is among the most aggressive that Brinker Capital would recommend for someone his age. It's not appropriate for those who need income from their portfolios on which to live.

"My entire portfolio, including my 401(k) assets, are 70 percent invested in aggressive equity strategies, while 30 percent is allocated to stable assets. Stable asset classes cushion volatility, support compounding, and manage the behavioral tendency to sell when markets are volatile," Widger says.

His portfolio holds DoubleLine Total Return, Riverpark Short-term High Yield, and a publicly traded private-equity fund, Red Rocks Listed Private Equity.

Widger advocates the "endowment model" of investing, which was championed by Yale University's David Swensen.

"We've adapted Swensen's model for individual investors. And who was Swensen's mentor? James Tobin, a Nobel laureate. Tobin said put 90 percent of your assets into equities, and 10 percent in Treasuries."

Currently, Widger believes the capital markets are fairly valued, meaning neither cheap nor expensive. "The economy is $18 trillion, and the Dow is at 18,000," he notes.

"The economy will grow steadily, and markets will go up steadily, too. That's why you should have an equity bias with a long-term time horizon, according to Tobin."

For international and emerging markets, Widger uses a mix of active and passive funds.

"We use passive when we think active does not add value. As for fixed income, it's a mix of domestic and foreign securities, which are actively managed so principal can be protected as interest rates rise," he says.

"I expect this mix of strategies to outperform Treasuries and the Barclays Aggregate in a rising-interest-rate environment."

His nontraditional investments, such as the Red Rocks private-equity mutual funds, real estate investment trusts, real estate debt funds, and real asset funds, provide inflation protection.

"A number of the brand-name private-equity firms have liquid affiliates which can offer good returns," he says. "Those are publicly traded."

After fees, annualized returns for Widger's aggressive equity strategies in the "accumulation" portion of his portfolio totaled 4 percent for one year, 14 percent for five years, and 6 percent for 10 years. "I'm beating inflation and creating purchasing power," he says.

What about fees? If you have money with Brinker Capital, you pay fees charged by the underlying mutual funds, which Brinker selects, and an additional 0.30 percent annually for Brinker's selection.

"I pay Brinker's fee personally, by the way," Widger says.

"There has been repression by the Fed, which created a 'put' on the equity market, that is, making sure it stayed up and created a wealth effect. Now, we should be going into a more volatile period, and active managers should outperform. And they are."

As for rising interest rates, that could lead to lower prices in some bonds, he says.

215-854-2808 @erinarvedlund