Evoke Advisors' Michael Carney on Why the 60-40 Investment Strategy Needs an Update
Michael Carney grew up as an athlete. That may be why he views venture capital as a team sport.
On this episode of the LA Venture podcast, the senior vice president of Evoke Advisors discusses the guidance he gives to entrepreneurs and his take on the current investment landscape.
At Evoke, Carney counsels clients on their public and private market investment strategies. He also oversees Evoke’s $100 million fund of funds where he invests directly into VC funds. Carney brought his years of experience working at a venture capital firm and covering the Los Angeles business scene as a journalist to help Evoke navigate the startup ecosystem.
Founded in 2019, Evoke aims to oversee wealth management in a different way.
For the past 40 years, people have typically invested with a 60/40 portfolio—60% of their money in growth assets and 40% in conservative assets. Carney said that made sense at a time when interest rates allowed you to get an attractive yield on the safe stuff and when the stock market wasn't as highly overvalued as it is today.
“That's no longer the case,” he said. “And so that portfolio doesn't really work or doesn't really deliver the returns that most clients are looking for.”
Instead, he said investors should think more about how to diversify their portfolios as the market changes. His job is to work with entrepreneurs to evaluate the best path forward in response to new challenges.
“The number one rule of managing ultra-high net worth is…don't go backwards,” he said. “You kind of already won the race, you're on the other side of the finish line, you're drinking your Gatorade—don't go run the race again.”
Carney explains the advantages to doing tax and estate planning ahead of time. He says that when a client comes to him a month before a liquidity event and asks what they can do, the answer is that there’s much less that can be put in place than there would have been with more advance planning. He also explains why market cycles complicate things.
“The very best day to sell your company is inherently the very worst day to then turn around and reinvest the cash,” he said. That can be a difficult lesson to grasp when clients come into cash and want to quickly reinvest it.
“So a lot of our advice often is ‘slow down, don’t be in a hurry’,” he said.
dot.LA editorial intern Kristin Snyder contributed to this post.