Core Investing

Our process for constructing the core allocation of each client portfolio follows a comprehensive four-step due diligence process:. 

Step 1: Screening
Quantitative criteria is used as a starting point to screen for potential investments. The purpose of the screening process is to narrow down the universe of investments that meet the objective criteria.

Step 2: Analysis
Investments are then analyzed based on quantifiable risk characteristics, peer group rankings, benchmark-relative performance, consistency of investment management style, and internal expenses.

Step 3: Portfolio Construction 
We then assess how well each investment fits with other portfolio holdings, reviewing metrics to ensure that holdings will perform as expected in different market environments.

Step 4: Ongoing Monitoring
Core allocations are evaluated on an ongoing basis to determine whether or not the allocation or underlying investments are meeting expectations.

Maintaining Equilibrium
Adherence to a consistent rebalancing strategy helps ensure that core allocations stay on track and in line with the defined tolerance levels (or, "bands"), allowable to a particular asset class. Over time, portfolio characteristics and asset weightings may shift away from this designated comfort range. Through proactive and continuous monitoring, our research group can identify whether positions have become too risky or too conservative and make adjustments as necessary to rebalance the weightings of the core allocation.

Tactical Investing

There are a variety of tactical strategies that may be considered when designing an appropriate investment plan.  Each strategy offers a unique methodology and, consequently, its own features, benefits, and risks. 


Equity Overweights or Underweights
This strategy is our most prominent approach to tactical investment management.  It is a low-activity model, designed to generate potential outperformance through a disciplined risk-managed process.  The strategy seeks to have maximum equity exposure during upward trends, and minimal equity exposure during downward trends.  The strategy is re-allocated quarterly, based on quantitative market indicators.  At the start of each quarter, if both domestic and international equities are deemed to be in an uptrend, then equities are assigned the maximum allocation for the quarter.  If both domestic and international equities are deemed to be in a downtrend, then fixed income investments are assigned the maximum allocation for the quarter.  However, if only domestic or only international equities are deemed to be in an uptrend, then the allocation is split among equities and fixed income investments for the quarter.  Rather than fully diversifying the tactical allocation, we rely on quantitative research at the asset category level to identify which equity or fixed income investments appear most attractive for the quarter. 


Sector Rotations
This strategy is a risk-managed approach that invests in either high-ranked US equity sectors or in high-ranked bond sectors.  At the start of each quarter, a risk measurment is made to determie whether the strategy will invest in equity sectors or bond sectors for that quarter.  When invested in equity sectors, a re-allocation of the portfolio is subsequently made monthly.  When invested in bond sectors, a re-allocation of the portfolio is made quarterly.  A variation of this strategy may be used for smaller accounts, and invests only a broad market indexed position when equities are in favor.

Alternative Investments
These investments are those that do not fit into the standard equity or fixed income classifications, such as managed futures, long/short, market-neutral, real estate, and multi-alternative. These investments typically offer additional attributes in their investment profiles, such as low or non-correlation, which may help to reduce overall portfolio risk.  When used, alternatives investments are subject to the same four-step process outlined within the core allocation methodology, and generally adhere to buy-and-hold principles.  Investing in alternative investments may not be suitable for all investors and involves special risks, such as risk associated with leveraging the investment, adverse market forces, regulatory changes, and illiquidity.

Tax-Preferred Vehicles
There are a variety of investments and products that provide preferential tax treatment, such as annuities, life insurance, and municipal securities.  These vehicles may constitute the tactical allocation of a client's portfolio, while adhering to traditional asset allocation strategies within the vehicles themselves. 


Equity Income
The universe we start with is the S&P High Yield Dividend Aristocrats Index, which is comprised of the companies in the S&P 1500 that have a track record of increasing their dividends every year for at least the last 20 years. In addition, we also look opportunistically outside this universe to find companies that have a very strong balance sheet, superior cash flow, and a commitment to paying dividends, but do not meet the 20-year criteria set forth by Standard and Poor’s. We consider these companies potential "future aristocrats."  We further narrow down the field by performing fundamental analysis on the stocks in the universe to find those with the most attractive risk/reward ratios. Since the primary goal of these stocks is to generate income, we look to avoid names that may be at risk of not being able to increase their dividends because of insufficient cash flows or an overleveraged balance sheets. We closely watch valuations to ensure that we are taking an appropriate total return perspective, so as to avoid the risk of significant loss of principal.

Growth at a Reasonable Price
The process of evaluation starts with a narrowing of the S&P 1500 universe through quantitative metrics. The quantitative screens focus on financial growth and valuations relative to sector peers to help find the best opportunities within each sector.  From that group, company level (individual security level) evaluations are employed that focus on quality and momentum of a company’s stock. The last step is a more fundamental analysis that is performed with the help of a custom factor weighting process that determines the final list of names included on the "growth at a reasonable price" list.

Investing in alternative investments may not be suitable for all investors and involves special risks, such as risk associated with leveraging the investment, adverse market forces, regulatory changes, and illiquidity. There is no assurance that the investment objective will be attained.