Philosophy
The basis for our portfolio design, construction, and management philosophy is the adherence to strategies that have long been employed by the nation’s largest and most successful endowments, pensions, and foundations. These strategies partner traditional financial investments such as stocks and bonds with alternative investment holdings designed to have minimal correlation to equities and fixed income. Because stock and bond markets have traditionally had an inverse relationship, the addition of investments with low correlation can contribute to less volatility, and the potential to generate positive returns in both up and down market cycles. We advocate a three-pronged approach of leveraging the growth opportunities of the equity markets; maintaining the stability, liquidity and yields of fixed income and cash; and the portfolio flexibility of alternative investments to ensure more stable, defensive, and consistent investment portfolios.
Portfolios
The basis for our portfolio design, construction, and management philosophy is the adherence to strategies that have long been employed by the nation’s largest and most successful endowments, pensions, and foundations. These strategies partner traditional financial investments such as stocks and bonds with alternative investment holdings designed to have minimal correlation to equities and fixed income. Because stock and bond markets have traditionally had an inverse relationship, the addition of investments with low correlation can contribute to less volatility, and the potential to generate positive returns in both up and down market cycles. We advocate a three-pronged approach of leveraging the growth opportunities of the equity markets; maintaining the stability, liquidity and yields of fixed income and cash; and the portfolio flexibility of alternative investments to ensure more stable, defensive, and consistent investment portfolios.
Stocks
Our process for investing in the equity markets begins by first understanding and evaluating the micro-economic, macro-economic, and domestic and international political landscape. What is critical to long-term investment success is to employ strategies that take a diversified, tactical approach and are designed to protect client assets when the markets sour. This is accomplished by identifying and understanding the varying levels of risk in the market at any given point, and positioning portfolios appropriately. Our strategies look to participate when the market is showing lower risk, protect when risk is higher, and be cautious when the markets are volatile. We look to add growth and diversification by including holdings in the following equity asset classes: US large-cap, mid-cap, and small-cap, developed large-cap international, developed small-cap international, and emerging markets. Our equity portfolios are constructed predominately of no-load actively managed mutual funds and exchange traded funds (ETFs). We also accomodate the inclusion of individual and preferred stocks when specifically requested by our clients. We see the marriage of best-of-class mutual funds with cost-effective index-matching ETFs, and case-specific individual stocks, as the most effective way to manage equity portfolios.
Fixed Income and Cash
We believe that fixed income and cash holdings are vital components of well-constructed portfolios, and we build ours to meet the individual needs of each client. In addition to evaluating the desired tradeoffs between yield, security, and liquidity, we work closely with our custodian, Schwab Advisor Services, to ensure that we purchase these holdings at the best available prices. We look for value, yield, and diversification through various fixed income and cash instruments including: municipal bonds, corporate bonds, treasury bonds, treasury inflation-protected securities (TIPS), international bonds, preferred stocks, high-yield bonds, equity-indexed notes, bond mutual funds, bond exchange traded funds (ETFs), certificates of deposit (CDs), and money market funds.
Alternative Investments
Among the alternative investment strategies that we employ, the most common include exposure to commodities through commodity mutual funds and ETFs, real estate (residential, commercial, healthcare, assisted living, and multi-family housing REITs and ETFs), managed futures, market neutral mutual funds (also know as long-short funds), currency mutual funds and ETFs, arbitrage funds, and hedge fund replication ETFs. Our alternative investment holdings are traded on common exchanges such as the New York Stock Exchange and the NASDAQ Exchange, providing a high level of liquidity and transparency. Additionally, all alternative investment positions are held directly in our client’s individual Schwab Advisor Services accounts.