Revisiting Hedge Funds

BY SAMUEL T. BROOMER

Freedom from Market Swings” ( JofA, May02, page 49) was both enjoyable and thought provoking. While reflecting upon the article, I formulated two distinct impressions of the information presented.

First, it has been argued that recent valuations might not have been realistic or sustainable over the long run based, in part, on certain underlying financial characteristics.

Second, investors in every tax bracket effectively are forced to employ a buy-and-hold strategy through their employer-sponsored 401(k) plans. These plans generally do not allow the participants to “look beyond stocks and diversify with alternative investments.”

A lot of attention has been given to the 401(k) plans, but there is more work to be done as corporate America moves away from defined benefit programs toward defined contribution plans. Over time these programs will need to offer the flexibility of an unsheltered and individually managed account if they are to successfully fulfill society’s intentions and expectations. For example, investors require diversity not only within asset classes but also among investment alternatives if they are to reach Markowitz’s efficient frontiers. Alternatives create the need for sound advice and education, both of which benefit CPAs, the profession and markets by offering choice and transparency.

Samuel T. Broomer, CPA
Tolland, Connecticut

Letters to the Editor

The JofA encourages readers to write letters on important professional issues in addition to comments on published articles. Because space is limited, letters submitted for publication should be no longer than 500 words. Please include telephone and fax numbers.

SPONSORED REPORT

Solving the lease accounting challenge

The challenges of the new lease accounting standard have been pervasive to say the least. In this free, independently-written report, you'll learn effective adoption strategies as well as resources for easing the transition to the new standard.

FEATURE

Tackling TCJA changes this tax season

Return preparers must be ready for how the Tax Cuts and Jobs Act has modified many common features of individual and business returns.