The Investment Policy & Strategy Committee, or IPSC, which is comprised
of our chief strategist and several of our senior portfolio managers, is charged
with the responsibility of adding value through asset allocation and manager
selection. This is done through the use of our proprietary investment management
by our internal analysts, and by those whom we believe are best-of-breed external
managers.
The IPSC develops model asset allocations assuming differing levels of risk,
liquidity and income tolerance as well as conducting outside manager due diligence.
Our proprietary model portfolio structures are not merely a backward-looking,
mechanical exercise based on the past performance of different asset classes.
Instead, our IPSC overlays our judgment on the likely future performance of
different asset classes in arriving at optimal portfolio structures. None of
our dedicated investment analysts serves on this committee, which safeguards
the independence of the IPSC’s recommendations.
Our portfolio managers are responsible for creating a customized investment
program for each client based upon the IPSC’s work. An interactive dialogue
ensures that each portfolio plan is based upon each client’s defined written
objectives. Each client’s portfolio strategy takes into account that client’s
risk tolerance, income and liquidity requirements as well as the effect of diversifying
out of low-basis and/or sentimental holdings.
Historically, the IPSC has added value to our clients’ portfolios through
asset allocation weightings and manager selection.
From inception, we have employed a system of peer group reviews to ensure that
client portfolios have been constructed in a manner consistent with our best
collective thinking. In annual peer group reviews, the asset allocation within
each client portfolio is compared with such portfolio’s defined objectives
and portfolios that are not fully aligned with the investment objective are
then singled out for further review and discussion. Our objective is for all
clients to receive our best thinking and for portfolio managers to manage portfolios
consistently with our policy. As a combination of these various factors, the
client relationship is with us and not merely with an individual at our company.
We believe that it is impossible for a single manager to perform all forms
of investing equally well. Thus, our core proprietary investment capabilities
are focused on a narrow range of highly disciplined U.S. equity and fixed income
management strategies. Our investment teams have exhibited strong performance
records. With respect to these strategies, roughly 55% of our total assets under
management are managed in our proprietary investment strategies.
Our outsourced investment capabilities include alternative investments as well
as traditional investment approaches in the categories of domestic large, mid
and small cap growth equity, international equities and high-yield bonds.
Proprietary Equity Strategies
Our equity strategies rely on a team-based investment approach and a rigorous
investment process. This approach has resulted in returns that exceed relevant
market benchmarks. We believe this team approach has provided and will continue
to provide consistency to our investment process and results over the long-term.
Our investment analysts are generalists who employ a “bottom-up”
value oriented equity selecting methodology. Our analysts collectively monitor
a universe of approximately 100 stocks that are deemed to be attractively valued
relative to their business outlook and management’s history of adding
value.
Once stocks have been approved for investment from this body of research, they
become part of one or more model equity portfolios. These are generally large
cap, small cap, Smid cap, multi-cap, equity income and focused value. Each stock
position is continually monitored against its investment thesis to ensure investment
discipline, and we employ a strict discipline to trim or sell securities in
the following circumstances:
when a stock is excessively valued in our models or the best case scenario is
reflected in the stock price;
due to a stock’s outperformance, which can adversely affect a portfolio’s
diversification;
due to underperformance, when a stock trails relevant benchmarks by more than
10%; or
when the investment thesis changes, due to a loss of confidence in management,
a change in business prospects or the deterioration in earnings quality.