Discretionary Investment Management

We manage investments for clients with differing needs. Some are saving and planning for retirement while others are already retired and are enjoying the fruits of their labor. Our institutional clients may be managing their endowments or are providing their employees with retirement savings plans.

Yet all of our clients are aware of the importance of generating positive returns while managing volatility. We strive to meet their objectives through the disciplined application of prudent investment principles.

The BFP Approach

Philosophy

We believe an endowment approach to portfolio management is as practical and prudent for individual investors as it is for endowments and foundations. We believe investors should emphasize risk management while targeting long-term positive real returns. 

Investment Objective

We emphasize capital preservation and long-term returns above inflation while managing overall volatility.

We prefer balanced portfolios as we believe they offer the best risk and return profile for our clients. However, we do not adhere to strict rules regarding asset allocation. Consequently, our asset allocation to specific asset classes, styles and sectors will vary with time based on our on-going research and analysis. We believe our approach has proven beneficial to our clients over time.

With regard to equities, we are value investors and prefer funds focusing on stocks of companies with strong balance sheets, steady earnings, consistent cash flow and reasonable valuations. We do believe in international exposure and will take into consideration currency exposures.

With regard to fixed income, we favor funds focusing on investment-grade bonds that offer good protection from credit defaults and we minimize exposure to below investment-grade securities in bond portfolios. Again, we do believe in international exposure and again take into consideration currency exposures.

We will also consider the use of alternatives where and when appropriate. These investments could include exposure to commodities, real estate investment trusts, precious metals, absolute return strategies and other hedged strategies. We do believe these strategies can provide diversification benefits to client portfolios while also providing the potential for positive returns.

Realistic Benchmarks

A fundamental principle that investors often ignore is the selection of an appropriate benchmark to measure performance.  We believe that setting a realistic investment return objective is the prerequisite for successful investing. Proper benchmarking helps to avoid excessive risk in constructing portfolios and gives more consistent results.

Portfolio Strategies

Each client’s situation determines the allocation to specific asset classes. We begin with a top down allocation to equities, fixed income and, when appropriate, alternatives. Asset classes are further subdivided into sub styles and geographic allocations. The specific percentage allocated to each sub category is based on its valuation, return potential and the diversification benefit it offers the portfolio. The resulting asset allocation is reviewed and revised as necessary to ensure it remains consistent with our client’s current financial health and long-term objectives.

Implementation Primarily through Mutual funds

Our portfolios range in size from $100,000 to $3,000,000. We do not believe portfolios in this size range can be optimally invested using individual securities. Rather, we believe they are ideally suited for the use of mutual funds. We believe it is critical that each fund we select should provide a unique benefit to the portfolio and should have characteristics that clearly distinguish it from the other funds in the portfolio. This lack of "correlation" provides important diversification that can help reduce volatility as well as unintended exposures. We primarily use open and closed-end funds but will consider using Exchange Traded Funds (ETFs) when and where appropriate.

Critical Qualifying Criteria

(A) For stock funds: Preference for funds managed by boutiques, managers with a long tenure who invest their own funds alongside investors, funds that raise investment minimums to prevent speculative inflows/outflows, funds that close when the managers cannot find profitable investment opportunities and funds that adhere closely to their stated styles and asset classes.

(B) For bond funds: Lowest fees, purity of asset class & manager tenure.

(C) For All Funds: Good risk-adjusted performance, no loads or 12-b 1 fees

Process for Selecting Funds

Currently, there are nearly 14,000 funds available. Thus, we believe that it would be impossible to review all of these individually to create a short list for each asset class and style.  As such, we use a combination of approaches in preparing and updating our shortlists:

• Use of search criteria provided by Morningstar for a preliminary short list.
• Our awareness regarding competence and integrity of the well-known firms.
• Our own experience as investors in funds.
• Extensive research of articles, fund manger reports and Morningstar assessments of funds/ fund houses.

Client Communication

We consider review meetings as the best form of communications. We encourage clients to meet with us semi-annually to review performance. We also use these opportunities to present our views on the economy and any contemplated changes to their portfolio. Our meetings can be in-person, by phone or online. Clients also receive monthly account statements, monthly e-mail and quarterly print newsletters. Clients are also given ID’s and passwords to access their personal account/s through our website.