March Madness

3/20/2023

At this time of year, I am always looking for a distraction from the constant attention to rapidly approaching tax deadlines. Even when everything goes right, tax season is burdensome. March Madness would ordinarily be a welcome distraction. But this year, the phrase March Madness seems to refer to rapidly unfolding developments in the financial markets rather than the spectacle of an NCAA basketball tournament.

Talk of bank runs, bank failures, and financial contagion is understandably unsettling. It can trigger irrational fear and doubt that can lead to brash actions and bad decision-making. It reminds me of what an old friend used to say: “There are few things in this world a couple of shots of Jack Daniels can’t make worse.” Likewise, there are few financial decisions a couple of shots of irrational fear can’t make worse. Below are some actions we are taking to respond to unfolding developments. 

We currently have exposure to over 130 active private investments across our client base. This includes real estate, private income, and private equity investments. These investments are typically limited partnerships with an operating partner who manages the underlying investments. Capital is contributed when ‘called’ by the manager and typically submitted via wire transfer from client accounts. Collectively, our private investment managers have relationships with more than 80 individual banks. Not surprisingly, Silicon Valley Bank, Signature Bank, and First Republic Bank are on the list. We are re-examining all these relationships, confirming manager deposits are under FDIC Insurance limits, verifying chain of custody of client funds is secure, and discussing backup plans with managers where appropriate. With respect to Silicon Valley Bank and Signature Bank, we have confirmed both current and future depositors will receive unlimited FDIC coverage.

We continue to monitor market developments and the actions of regulators very closely to keep abreast of how risks are evolving. The critical part of this monitoring is identifying whether changes in relative risk mean that we should recommend redeployment of client funds.

Years ago, an old mentor made an observation that strikes me as particularly relevant for times like these: “In nearly every effort worth pursuing, I think the secret to eventual success is the same. Find a set of well-informed daily actions that you’re convinced will produce good results if you follow them consistently. Then follow them consistently. In a world where randomness, frustrations, and events outside of one’s control play an enormous role in day-to-day outcomes, the best measure of day-to-day success is whether or not those daily actions were followed. Over time, the results take care of themselves.”

We are focused on the daily work that hopefully adds up to success over time. It is work we are called to do, in challenging times as well as easy times. We hope this brings you some level of peace and comfort. We hope this enables you to focus your attention on the traditional meaning of March Madness, where the drama plays out on the court, and not in the markets.

Mike Masters