Founder & CEO
Jamie Ebersole is the Founder and CEO of Ebersole Financial. He enjoys interacting personally with all clients and oversees all accounts, utilizing his comprehensive knowledge of investment strategies, risk management, asset allocation models, retirement planning, and income tax and gift planning for high net-worth individuals and their families.
Prior to founding Ebersole Financial, Jamie spent 15 years working with large financial institutions helping them reach their investment goals. During that time, he was responsible for the oversight and management of investment programs of more than $1.5 billion on behalf of those clients.
Early in his career Jamie worked in the financial planning and mutual fund accounting businesses. Following his MBA studies, Jamie spent the next 15 years working for Allianz Private Equity Partners (part of the Allianz Group) in New York and later SL Capital Partners (part of the Standard Life Group) in Boston, managing private equity investments on behalf of institutional investors, including insurance companies, public and private pension funds and family offices. As Managing Director at each firm, he was a member of the investment committee and responsible for setting investment strategy. Jamie has extensive experience dealing with family businesses, as the child, brother and grandson of small business owners, and he relishes now being a member of the family business community himself.
Jamie earned both a Bachelors and Masters degree from Tufts University here in the Boston area. He later earned an MBA from The Red McCombs School of Business at the University of Texas at Austin and an MBA from the Pontificia Universidad Catolica de Chile in Santiago, Chile. Jamie has lived overseas for extended periods of time including stints in Munich, Germany, Santiago, Chile, London, England and Vienna, Austria.
Jamie is a Certified Financial Planner® (CFP) practitioner, a CFA charterholder and a member of the CFA Institute (Chartered Financial Analysts). He is an active member of the FPA (Financial Planning Association), serving on their Career Development Committee. He is also a member of the Boston Society of Securities Analysts and serves on their Alternatives and Real Assets Committee. Allowing him to bring one of his personal passions into his professional life, Jamie also serves as a Golf Committee Member for the Boston Estate Planning Council.
An active community member, Jamie serves in local town government, and is a community board member for The Fund for Wellesley. He is also an Audit/Finance Committee Member for Rosie’s Place in Boston.
BA, Tufts University
MA, Tufts University
MBA, The University of Texas at Austin
MBA, Universidad Catolica de Chile
Assets Under Management:
Jamie Ebersole CEO of Ebersole Financial LLC
Private Equity (PE) and Venture Capital (VC) are investing strategies that sit at the end of a spectrum of private company investments. VC sits on one extreme and focuses on investing in a range of start-up and growth companies before they become profitable. Because these companies have limited operating history and limited profits, if any, they cannot access the public markets to help finance them in normal times. Thus, they require private investors to provide funding to help them reach their potential. Most VC-backed companies fail and a venture capitalist is considered to be doing a good job if 4 companies in a portfolio of 20 generate positive returns. Given the high level of risk and company failure, venture capitalists expect these 4 companies to generate huge returns (10x+ their initial investments) to compensate for the losers.
Most positive exits occur through IPOs, although strategic M&A is a major exit strategy these days. PE sits on the other extreme of the spectrum and invests in mainly mature, profitable companies and some growth companies that can handle leverage to help generate investor returns. PE investors typically invest in the equity of private companies and use leverage to fill the valuation gap. Valuations are generally based upon a measure of modified cash flow, EBITDA. PE companies are able to tap the public and private financing markets to finance their operations, due to their size and positive operating history. PE investors will typically have 10 to 15 companies in a portfolio and will expect all of them to generate positive returns with low losses. Any returns over a 3x multiple of invested capital are considered to be a home run as most PE investors will target 2x returns and IRRs in the mid-to-high teens on a single investment. PE investors typically sell their companies to other PE firms, strategic acquirers, or through IPOs.
Closed-end mutual funds are investment companies that offer shares to the public and are publicly traded on a stock exchange. They differ from open-ended mutual funds in that they have a limited number of shares outstanding and generally do not accept new money after the initial public offering. Thus, they are capitalized once at the beginning of their life and the proceeds are used to purchase a basket of securities that the investment company will manage targeting a specific strategy. Popular strategies include foreign country funds (emerging and developed markets), targeted municipal bond funds,(state level taxable or tax-free, etc.) and diversified stock and bond strategies. NAV (net asset value) is the measure of total assets less any liabilities on the part of the investment company. This NAV number generally represents the book value or net asset value that each share of the mutual fund "owns."
Because closed-end funds are traded on a public stock exchange, the price of the shares will be determined by the market. As such, the share price at any point in time will likely trade at either a premium or discount to the stated NAV. Over the longer term, the share price and the NAV should converge. There are many times when closed-end funds will trade at a premium or discount to NAV when there is no discernible reason for the difference to exist. Normally, though, the differences will be based upon the perspective of the buyers and sellers and their expectations for the future performance of the assets. For example, if you are looking at a long term municipal bond fund and investors are expecting interest rates to decline to a level that is lower than the current level, you may see the fund trade at a premium. This signifies that investors are willing to pay more today to get the future potential appreciation.
If you have a fund that invests in private debt instruments of private companies, and interest rates are going up, you may see the fund trade at a discount to NAV as the market expects there to be write-downs in the value of the debt instruments when future financial results are released. Some funds, such as emerging market funds, may trade at a discount due to the illiquidity of the underlying shares owned by the fund, signifying that investors expect the fund to have a hard time selling these assets at the current prices in the event they were forced to sell. At the end of the day, the discount or premium to NAV boils down to an imbalance in the supply/demand dynamic for the fund and its strategy. If no one wants to own the fund, it is likely to sell at a discount to entice buyers. If everyone wants to own the fund, it will likely trade at a significant premium. Beware, that as the fund is an investment company, it has costs to run its operations, and if they are very high, they are likely to cause the shares to trade at a discount. Also, funds with a very small number of shares will likely have greater fluctuations in their premia/discounts across time. As with all investments, closed-end funds can be a great instrument, but you need to do your diligence and truly understand the finances of the fund and the outlook for the strategy that is being pursued. It is always advisable to discuss an investment in closed-end funds with your advisor before making any investment.
I will try not to repeat what the other advisors have already provided in their responses, but will add a few caveats to the conversation.
The term hedge fund has evolved from the early days when hedge funds actually hedged their positions as compared to the general markets. Today, though, hedge funds are private investment funds that follow a variety of strategies (Global Macro, market neutral, Long/Short, commodities, etc.), many using leverage in order to generate outsized returns (many times with outsized risks) versus the market. In many ways, they are less-regulated mutual funds with higher fees. Their performance across time has been shown to be relatively average (with high costs) and many large institutions have begun to pare back their exposure to the funds.
Private equity funds are usually pooled limited partnership vehicles used to make investments in private companies. The industry has grown dramatically over the last 20 years with firms like KKR, Bain Capital, Blackstone, The Carlyle Group, and others dominating the upper end of the market and many have gone public to access longer term funding at a lower cost than in the private markets. Private equity investors tend to specialize on an industry segment, geography, company size and/or type of transaction (distressed, turnaround, growth, etc.). LPs have historically been university endowments, pension plans, insurance companies, foundations and family offices.
The main differences between the two fund types are that hedge funds tend to invest mainly in securities in liquid markets and have greater liquidity for their investors, while private equity funds invest in privately negotiated transactions with private companies and have limited liquidity for their investors during the holding period of the assets. There is a growing secondary market for private equity LP units that makes it easier to sell an LP unit at a point in time, but it is still a negotiated market with private buyers and sellers. Also, while certain hedge funds may build concentrated portfolios, they tend to hold many more investments, and have much higher leverage than a typical PE fund. PE funds, on average, hold anywhere from 10 to 20 investments and employ leverage at the operating company level, as compared to holding leverage at the portfolio level, as do many hedge funds. This actually reduces the risk of a portfolio implosion at a PE fund as compared to a hedge fund, because the PE debt is secured on a company by company basis and is thus compartmentalized, where as debt in a hedge fund is backed by all of the fund assets.
Both types of investments can be diversifiers for large sophisticated investors, but are generally not appropriate or necessary investments for smaller investors due to high fees and mediocre performance.
Thinking about volatility and its affect on your portfolio is a good thing. Pulling your money out of the market in order to try to time market performance is a very difficult thing to do based upon the academic research. If selling your mutual funds is part of your long term plan and asset allocation and you have thought through the consequences, then you can safely keep the money in cash or safe bonds in line with your well-developed strategy. Getting more than 2% on bonds will subject you to additional risk, so you may be switching one risky asset for another stripe of just as risky asset in a different wrapper. As always, whether you should try to time the market depends upon what your ultimate goal is. Is it to protect capital from risk of loss? Then 2-3% is what you will get with most safe bonds. You can allocate the funds to higher yielding bonds and preferred stocks, but you risk significant downside in case of a correction. Your coupon payments will offset some of this, but not all of it. The only way to avoid a dip in value of the proceeds is to keep the funds in cash. That being said, if this is a taxable account and you have any gains, you will also pay capital gains taxes which will come from your proceeds. This is less of an issue in a non-taxable account.
Whenever you decide to re-allocate your portfolio be sure you have thought through the consequences. Re-allocating from stocks to bonds may be a smart thing to do in this market, but there is no easy way to generate a risk-free return above what risk-free assets are paying in the market. To get higher returns, you will need to take more risk which it sounds like is not what you are trying to do. Good luck!
Congratulations on being smart and asking the right questions. Much of this will depend specifically on your short and longer term goals and without a whole lot of additional information its hard to make any recommendations so consider these as possible ideas. Working with a knowledgeable advisor is also something you should seriously consider given that you acknowledge that you don't have a lot of financial knowledge. In your shoes I would interview 3 to 5 independent financial advisors who happen to be fiduciaries. This ensures that the advisor has a legal obligation to put your interests first. If the advisor is not a fiduciary (broker), then I would tend to stay away. Avoid anyone who tries to sell you a product (insurance, annuities, etc.) Also, the advisor should have the CFA designation and the CFP designation at a minimum. With this sum of money, you want someone with investment expertise (CFA) handling your accounts. Also, look for an advisor that has a low-cost investment approach as low-costs correlate with higher returns over time. Finally, make sure you understand how the advisor makes their money. Here is what I might suggest to someone in your situation:
1) Pay off your debts and then allocate a portion of the inheritance to travel right away. I might recommend a $50k to $100k budget that will allow you to fully explore your travel desires and it will give you time to think more broadly about your future plans.
2) Keep your inherited assets in highly liquid securities (cash, short term bonds, etc) until you feel you have found the right advisor to work with or until you have time to think about your investment needs. While you travel, you should feel secure knowing your assets will be there when you get back.
3) Once you have found your advisor, determine what you need in terms of returns from the assets. Will your salary meet your living expenses with the income from your inherited assets providing you funds for your extravagances? Will you need the inherited assets to pay for your living expenses? Given an account of $4.1mm, you should be able to grow those assets to support your longer term lifestyle, if the two are properly calibrated, and generate safety and current income. This will require work on your side with an advisor to develop a financial plan to align your lifestyle and assets so that they will give you the best chance at living the life you want.
Good luck in your search for a great fiduciary advisor (CFA, CFP) and with your future. By planning up front and being smart with your money, you have the chance to live a life many others will never get.