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. 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. While out-performing appropriate benchmark indexes is important, we view our priority as managers as properly aligning our client portfolios with their risk tolerance and long-term objectives.
Our clients frequently identify with one of three reasons for retaining BFP to manage their assets for them:
1) They have managed their assets themselves and didn't enjoy the process.
2) They were unhappy with their results managing their own assets.
3) They prefer to focus their energies on activities of greater personal value to them.
We have significant industry experience, a sound understanding of investment management practices and an objective, prudent approach focused on long-term return with an emphasis on managing volatility.
PhilosophyWe 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 ObjectiveWe 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.
We emphasize a Core/Satellite approach emphasizing Sector Rotation and primarily use Exchange Traded Funds as investment vehicles. The Core of the portfolio is primarily in domestic large cap equities on the stock side and intermediate government and corporate bonds on the fixed income side. The Satellite equity component will emphasize equity sectors we believe offer the most upside potential over the next 6-12 month period. The Satellite fixed income component will focus on bond sectors, such as high yield, convertibles, bank loans, international, long or short maturity, that we believe offer the best total return opportunity over the next 6-12 months.
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 BenchmarksA fundamental principle that investors often ignore is the selection of an appropriate benchmark to measure performance. Proper benchmarking can help to avoid excessive risk in constructing portfolios.
Portfolio StrategiesEach client’s situation determines the allocation to specific asset classes. We begin with each client completing a risk tolerance questionnaire. The results are reconciled with client objectives and cashflow needs. The result is an asset allocation that best meets needs/objectives while staying consistent with risk tolerance. We determine an 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 fundsOur portfolios range in size from $50,000 to over $3,000,000. We do prefer to use Exchange Traded Funds and believe it is important 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 Exchange Traded Funds (ETFs) but may, under appropriate circumstances consider open-end and closed-end funds.
Critical Qualifying Criteria
We emphasize Exchange Traded Funds with substantial liquidity (average daily volume) and competitive expense ratios. When using traditional 40 Act mutual funds we will consider:
(A) For stock mutual funds: Preference for managers, or teams, with a long tenure, with consistent long-term performance (preferably in the top 40% on trailing returns), with reasonable volatility (preferably below category median) and below median expense ratios.
(B) For bond funds: Low fees, purity of asset class & manager tenure.
(C) For All Funds: Good risk-adjusted performance, no loads or 12-b 1 fees
Our criteria is subject to change as market conditions warrant. We made add or remove criteria as we believe necessary to help us achieve our client objectives.
Process for Selecting FundsCurrently, 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 YCharts and 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 manager reports and YCharts assessments of funds/ fund houses.
We also use Porfolio Visualizer and RiskAlyze to analyze historical performance and gain insight into potential performance during "stress" events.
We do reserve the right to modify our criteria and our process from time to time as we believe necessary to provide prudent investment management for our clients.
Client CommunicationWe 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 meetings to review what is new with our clients, what concerns they want to discuss and 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.
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