How We Manage
We recommend that before employing any firm to manage your assets, it’s a good idea to fully understand the methodology behind the firm’s decision making process. In developing an investment strategy for our clients, we employ a Six-Step Management Process.
First, We Develop an Investment Policy Statement
In consultation with our clients we develop an Investment Policy Statement based upon their objectives, risk tolerance, expected rate of returns, and time horizon. This policy establishes reasonable objectives, expectations and guidelines, and creates the framework for long-term asset allocation strategy with a level of risk suitable for the client. The policy establishes standards for making portfolio performance evaluations, and so promotes a more effective communication with our clients during difficult investment environments.
Second, We Analyze The Client’s Current Portfolio And Compare The Results With Our Investment Policy
After creating this roadmap based upon the newly determined client tolerances to risk and expectations, we then analyze our client’s current investment holdings to establish how they differ from the proposed investment plan, how current desired returns differ from the plan, and how much risk is unnecessary or un-rewarded within the current portfolio. In consulting with our clients, we then decide which investments and asset classes to retain and which asset classes and investments to add or delete.
Third, We Reallocate Across Globally Diversified Asset Classes
The purpose of allocation is to reduce risk, not necessarily to increase return*. Investments that are concentrated in specific sectors may often add risk with no additional return. This is also true of national economies. While the America stock market slipped into a bear market in 2000 until 2003 and domestic portfolio returns suffered, many other nations around the world were having bull markets. A global asset allocation strategy invests a portfolio in different economies in order to reduce overall economic risk**. Investing globally helps reduce risk even if return is not increased. This is because the reliance on the U.S. economy alone for portfolio growth is reduced through this diversification. We utilize U.S. domiciled foreign and global funds as an integral part of our diversification strategy.
Fourth, We Seek To Add Value Through Careful Portfolio Selection
In constructing our portfolios we seek out funds and managers that best fit our clients risk tolerance and expected returns. We carefully screen and select funds and managers most likely to provide our clients a superior expected return within the dimensions of risk permitted by the investment policy of our clients. Research has shown that active management often produces superior returns to passive index ***investing. We therefore employ certain techniques that seek to enhance returns where appropriate.
Fifth, We Then Implement And Rebalance When Required
Our client’s assets are exclusively held at Pershing LLC, Bank of NY Melon, one of the largest and most respected clearing houses in the United States. They employ the latest technology to safely oversee and periodically report on client holdings. We also utilize Albridge Wealth Reporting System software and Morningstar Advisor Workstation to assist us with monitoring our client’s portfolios as asset classes change enough to become inconsistent with the investment policy. The portfolio is then rebalanced based upon the client’s investment risk and objectives. Generally, decisions regarding rebalancing are discussed with clients on a quarterly or semi-annual basis.
Sixth, We Report Results And Monitor Against Benchmark Indexes
We provide reports that compare investment performance to major Benchmark Indexes or Benchmark Indexes as set forth by the Investment Policy Statement. Periodic reporting allows our clients to measure the success of their plan within a reasonable timeframe. Our client’s portfolios are monitored to ensure that the underlying asset allocation is consistent with the Investment Policy Statement, and that each asset class represented still maintains its specific style and strategy. We believe asset allocation and a more dynamic approach to investing is the essence of portfolio management. However, the key to our client’s happiness is found in listening to their investment desires and keeping them adequately informed. Clients are given the right to access their accounts on-line to monitor their portfolio’s allocations as well as compare investment performance to the indexes discussed above. Our more conservative clients are educated to understand that their projected portfolio returns may not be as stellar as other more aggressive client portfolios. They also understand that their projected portfolio losses in any market downturn will generally be lower because of adequate diversification among asset classes that remain unaffected by moves in the markets. Our more aggressive client’s on the other hand, fully understand that in order to achieve higher expected returns over time, they must be willing to bear a far greater level of investment risk. Greater risk generally requires an adequate timeline for investing, a much higher discipline in investing and a willingness to ride out market fluctuations that often produce considerable losses as well as superior gains in aggressive portfolios. The portfolio structure decision as described in the Investment Policy Statement is among the most important decisions our clients make in their asset management plan. The client’s understanding of their exposure to risk, what overall asset classes the plan holds and in what proportions, will determine how well the plan performs relative to the overall markets and most importantly, relative to our client’s expectations.
*Investors need to be aware that no investment plan/asset allocation can completely eliminate the risk of fluctuating prices and uncertain returns. **International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks and differences in accounting methods.*** An index is a hypothetical portfolio of specific securities (Common examples are the Dow Jones Industrial Average and S&P 500). The performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and should only be compared with securities of similar investment characteristics and criteria. Investors cannot invest directly into an index. Past Performance is not an indication of future results. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment - Research Advisors, Inc., a Registered Investment Advisor, Cambridge and Curtis Financial Services are not affiliated.