Allocation process

We utilize a persoalized process to arrive at our strategic asset allocation recommendations. We recommend allocations to broad asset classes. We combine the science of optimization and statistical probabilities with the art of capital market experience. An allocation generally includes six broad asset classes: domestic equity, domestic fixed income, non-U.S. equity, non-U.S. fixed income, alternative investments and cash. Allocations to equity, fixed income and alternative assets are further segmented into subclasses and investment styles. Tremendous importance is placed on effectively rebalancing portfolios to keep pace with changing market conditions, while remaining conscious of tax considerations.

We use a “core and satellite” approach to investing. The core investments are managed across a minimum of five and as many as 15 subclasses. The objectives of core investments are consistent, positive returns that preserve and grow wealth over time. We believe that core investment should reflect the belief that investment returns are primarily driven by the broad market return or beta. Satellite investments are more opportunistic in nature and can be expressed in many ways; they are specific ideas or themes that can add alpha to a well-diversified portfolio without upsetting risk parameters. Our satellite investment ideas are tactical in nature and can produce higher risk adjusted absolute returns.

Our core investments are selected from the best available investment funds and managers, with no emphasis placed on potential institution or business relationships. For much of the core strategic allocation, a passive investment style that helps minimizes cost and provides complete market exposure is most appropriate. We use a bespoke model based on exchange-traded funds (ETFs) and structured investments that give upside participation and broad equity indices while protecting principle. Using ETFs allows us to closely track performance with lower fees than a more active strategy would incur.

Based on the needs and preferences of our clients we can manage fixed income in house or delegate to outside managers. Regardless, we believe strongly in the permanence and definition of owning individual bonds. Based on tax bracket and income needs, you buy either taxable or tax-exempt bonds across the yield curve.

After we determine and coordinate the equity investment implementation, we introduce our opportunistic satellite investments. These investments help mitigate risk by introducing non correlated assets into the portfolio, which may help create additional incremental performance. Here we combine industry-leading research with our investment process, resulting in overweight or underweight applications to particular sectors, countries and market factors.

Overall, we select investment vehicles that meet rigorous quantitative and qualitative standards and offer the best asset class coverage for our clients. Organizational soundness, regulatory compliance, investment continuity, philosophy, process and long-term performance are examples of the attributes for which we screen. We place the same importance on the hiring of the manager as we do on the firing. Unexplainable underperformance or deterioration of any of the factors listed above can lead to immediate dismissal of the manager.