Nuveen Investment Inc.’s Robert Doll Jr., a former BlackRock Inc. money manager who has been making an annual list of market predictions for the past 25 years, is giving clients a chance to bet on those views.
Doll, chief equity strategist at the Nuveen Asset Management unit, has created a short-term unit investment trust based on 10 predictions for 2014 that he revealed on Jan. 7, Doll said in a telephone interview today. Opened yesterday, the Nuveen 2014 Equity Outlook Portfolio (INNEOX:US) holds 25 equally-weighted stocks, which will remain fixed. Whatever gains the trust makes based on Doll’s predictions will be reduced by fees and commissions of about 3.5 percent.
“We’ll get some right and we’ll get some wrong,” Doll said. “The question is do we have the process in place whereby the predictions we make are more right than wrong.”
Doll, 59, known for his bullish stance on stocks, joined Chicago-based Nuveen in November 2012, six months after he announced his retirement from BlackRock, where he had been chief equity strategist. Doll has predicted that U.S. equities will have “another good year” in 2014, even while experiencing a 10 percent drop at some point in the year.
The trust includes retailer Macy’s Inc. (M:US) and Delta Air Lines Inc., reflecting his wager that cyclical stocks will perform well. The trust also owns cigarette manufacturer Lorillard Inc. and pharmaceutical firm Pfizer Inc. (PFE:US), which Doll expects will hold up well if a predicted 10 percent market correction takes place.
Doll in 2013 predicted that U.S. stocks would hit all-time highs, a call that proved prescient as the Standard & Poor’s 500 Index ended the year at a record. He also said that emerging-market stocks would beat developed-market equities, which proved wrong as developing nations trailed in 2013.
Unlike a mutual fund, a unit investment trust typically makes a one-time offering of a fixed number of units and has a specific termination date.
The Nuveen trust, sponsored and distributed by Chicago-based Incapital LLC, has an offering period of 90 days and is available only through brokers. Investors can redeem at any time at the trust’s net asset value. The trust will liquidate on or about April 9, 2015. Incapital and Nuveen expect to offer the product every year, based on Doll’s subsequent predictions.
The average buyer can expect total fees, including up-front sales commissions, to equal about 3.5 percent of their investment, Jason Wilson, managing director of Incapital’s financial-services division, said in an interview. Investors who roll their money over into the next year’s trust will see the commission drop by about 1.5 percentage points, he said. More than 90 percent of Incapital’s unit trust sales go through commission-charging brokers, according to Wilson.
Actively-managed equity mutual funds in the U.S. have an average expense ratio of 0.89 percent on an asset-weighted basis, according to fund-research firm Morningstar Inc. While some sales of those funds have commissions added, investors have moved away from so-called load share classes in recent years. Class A shares in U.S. mutual funds, which carry an up-front commission, had net withdrawals in 2013, while all share classes together had net deposits, according to Morningstar.
Nuveen, owned by Chicago-based private-equity firm Madison Dearborn Partners LLC, managed $118 billion as of Sept. 30, according to a statement from the company on the new trust. Incapital, the largest independent distributor of structured products in the U.S., manages about $200 million in unit investment trusts, Wilson said.
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