A variety of factors – such as market conditions, a growing household or lifestyle changes – can influence what type and allocation of investments best meets your needs and objectives at the present time. Our investment experts utilize three distinct elements to ensure your portfolio is always performing at maximum potential.
Establish a static portfolio mix to meet your goals. Strategic allocation reflects an initial portfolio mix designed to meet the long-term investment goals of each investor. It is based on our evaluation of historical long-term risk and return relationships of the asset classes and what we consider to be realistic expectations going forward.
It is the starting point for our active asset allocation process and adds value in the following ways:
- Serves as a permanent asset allocation unless there are opportunities that are compelling enough to justify changing the mix
- Provides a constant frame-of-reference, which increases the odds that we will consistently apply our methodology
- Provides a benchmark to measure the value added of our active asset allocation decisions
Take advantage of exceptional market opportunities. From time to time, the markets provide exceptional investment opportunities. Tactical allocation consists of deciding which asset classes are attractively priced and making opportunistic departures from the long-term policy by buying more of the attractive markets and reducing the unattractive markets. This adds more value to the return than would be achieved by simply holding the portfolio defined by the long-term policy. A strong discipline – consistently applied – can give us the strength to act when others allow fear or greed to cloud their decision-making.
We swing only at “fat-pitches” that we have a high level of confidence will add value to the long-term allocation policy. A fat-pitch typically has an extreme undervaluation (or overvaluation) relative to alternative asset classes. Our research suggests that asset classes that are extremely undervalued will outperform for a significant period of time in the not too distant future. Generally, these types of undervaluation are created during severe corrections or bear markets.
Given our valuation discipline, it is likely that we may be early entering and leaving asset classes, although we expect that – over a full market cycle – the investment will add significant value to the allocation policy. Our valuation discipline also helps us to avoid staying in marginal asset classes too late in the market cycle. We do not consider this market timing, rather an intelligent approach to valuation.
Choose the best equities, fixed income vehicles and outside managers for your portfolio. Our open-architecture process focuses on utilizing best-of-breed outside managers, as well as proprietary security selection. Depending on the needs of the investor, we may use one or a combination of individual securities, outside money managers, mutual funds and exchange-traded funds to implement our investment strategies. Our disciplined and in-depth research process is designed to select the best and most cost-effective investment vehicles, which can effectively capitalize on our asset allocation decisions.
Our stock selection process begins by identifying companies that have a history of outstanding business performance and are consistently able to generate high returns on capital and free cash flow, followed by companies that have sustainable competitive advantages that will allow them to prosper for the foreseeable future. Once we have identified these world-class companies, our focus shifts to valuation as we look for stocks that are trading at a significant discount to their intrinsic value. Our approach is focused on companies that have sustainable advantages over their competitors, allowing them to consistently grow and generate value for shareholders.
Our approach to selecting managers goes far beyond just looking at performance. Our methodology and resources are focused on identifying the qualitative and quantitative factors that generate a competitive advantage for a manager to consistently out-perform their respective benchmarks. Our disciplined research process and ongoing monitoring of managers allows us to add significant value relative to our investment strategy benchmarks.
Fixed income investments deserve a place in most portfolios, providing predictable cash flow, diversification and capital stability. Our fixed income strategy calls for a structured approach which staggers individual maturities, thus minimizing the risk from interest rate changes and managing cash flows. We also focus on the “intermediate” (5-7 year average life) portion of the yield curve, which research indicates provides the best risk-adjusted returns. We employ various proven techniques in security selection, maturity structure and market timing to enhance total return. In addition, we purchase only investment-grade bonds and positions are sized for optimal transaction costs and diversification. Our goal is to provide superior returns with less volatility.
*Investment Products are NOT FDIC Insured/ Investments NOT Guaranteed/ Investments MAY Lose Value