Investment Management

We practice a conservative investment management philosophy called tactical asset allocation. The fundamental idea is based upon diversification. When you put two asset classes in a portfolio that are not correlated with each other (or weakly correlated) you may produce a similar rate of return of each individual asset, but with less risk (volatility).  Managing risk in a portfolio is paramount to overall investment success and is critically important when the portfolio is providing income in retirement (the distribution phase).

The tactical part of the philosophy means that we take into account current market fundamentals and modify the portfolio allocation accordingly. For example, if we believe a certain asset class to be currently overvalued, we will reduce the portfolio’s exposure to this asset class. Conversely, if we believe an asset class is undervalued, we may choose to overweight its allocation in the portfolio. While there are many market metrics we follow, the basics are: gross domestic product (GDP) growth, Federal Reserve Policy, corporate earnings, interest rates, inflation, Washington and regulation, housing, autos, manufacturing, and employment. Having an understanding of these metrics, their trends, and how they may affect asset class prices in the future will help us add value by tactically adjusting the portfolio.

In addition to portfolio construction, we also specialize in choosing individual independent portfolio managers for each part of the allocation. A truly diversified portfolio is extremely complex today and made up of numerous asset classes. We believe there are active managers for almost every class that have proven long term track records of providing value. We select and monitor these managers on an ongoing basis, adjusting our exposure as the market dictates. If we believe a passive approach (i.e. indexing) is the best option for an asset class or because market conditions may dictate, we will execute that solution as well.  

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