We're living in a world of single-digit returns.
That was the main takeaway from endowment and foundation investment managers at an institutional investor roundtable Thursday in Boston, where most of the top colleges and universities decried the stock market's current low level of returns. The market has run up so much since the Great Recession, there seems to be little room to run further.
"I would be tickled to get 3 percent" real returns annually - meaning after inflation - in the current market environment, said John Alexander, chief investment officer of the Clemson University Foundation, who oversees the school's endowment.
If that's what the professional investors are expecting, retail investors should temper their expectations, including about pricey valuations in equities.
Rates "haven't been this low on average in centuries," noted Gerald Chen-Young, chief investment officer of the United Negro College Fund.
The low-rate environment has created "huge headwinds," added Shawn Wischmeier, chief investment officer at Margaret Cargill Philanthropies, which oversees $7 billion in assets.
What would shift their allocations? Among the range of answers: a big hike in rates, which would push endowments and foundations back into traditional fixed income, or a 20 percent to 30 percent drop in stocks.
Local luminaries who spoke at the roundtable included Sonali Dalal, direct of investment strategy and research at Pennsylvania State University; Thomas Cowhey, chief investment strategist at Hirtle Callaghan; and Julia Corelli, partner at the law firm Pepper Hamilton's Philadelphia office, who moderated a panel on private equity fees and the new scrutiny of and demand for more transparency by regulators.
Philadelphia lawyers, is your six-figure law degree a solid long-term investment? Maybe, but the barriers to entry are starting to come down, according to a Villanova University professor.
Pennsylvania hasn't bitten yet, but Washington state last year issued a new limited license legal technician (L.L.L.T.) program that formally allows nonlawyers to deliver legal services independently, without a lawyer's supervision.
Paula Littlewood, executive director of the Washington State Bar Association, noted that the licenses are similar to those in the medical profession through which physician assistants and nurse practitioners work under a doctor's supervision. In the legal profession, paralegals work under a lawyer while L.L.L.T.s are independent, although many work for law firms.
"Not every medical problem needs a doctor, and not every legal problem needs a lawyer," Littlewood said in a statement.
States looking into the L.L.L.T. model include California, New York, Utah, Colorado, and Oregon. For now, L.L.L.T.s can work only in family law, said Michele Pistone, law professor at the Charles Widger School of Law at Villanova University. But that could easily change.
"A lot of people think because law is highly regulated, we're immune from disruption," Pistone said.
But, similar to a nurse-practitioner and a doctor, "if you unbundle the lawyer job, there are a lot of tasks lawyers do that could eventually be done by computers through technology" or by people without law degrees, Pistone said.
In a paper titled Disrupting Law School, published by the California-based Clayton Christensen Institute for Disruptive Innovation, where she is a fellow, Pistone and coauthor Michael Horn note that access to a lawyer is "expensive and out of reach for many potential customers because the market for legal services is opaque and the provision of legal services has been restricted through licensure."
That has led to the rise of such legal disrupters as LegalZoom, Modria, and Rocket Lawyer, and e-discovery start-ups such as Ross Intelligence, an artificial-intelligence attorney that uses IBM's Watson cognitive-computing system to enhance legal research. Users ask legal questions in plain English, and Ross searches legislation, case law, and secondary sources.
The legal establishment may have no choice but to partner with the disrupters.
In September, the American Bar Association and Rocket Lawyer began testing a joint venture, ABA Law Connect, that connects ABA-member lawyers in Illinois, Pennsylvania, and California with legal questions related to small business through Rocket Lawyer's cloud-based platform. ABA Law Connect "will be an affordable way for small businesses in those states to get answers to fundamental legal questions." For $4.95, a small-business owner or representative can ask a question online of an ABA-member lawyer.