Investment Process
Utilizing an institutional investment approach has historically lead to a higher rate of return then the average investor*
Step 1: Assumptions
While looking in the rear-view mirror can provide us historical context and data, there is a reason our windshield is bigger than our rear-view mirror, we need to see what is coming at us on the road ahead. We believe successful investing begins with a long-term view. We utilize forward looking risk, return and correlation assumptions for different asset classes to develop our opinions about what we believe may likely happen over the long term. This is in contrast to the typical approach which relies on historical data as the foundation of the asset allocation. This is a rationale, disciplined approach that removes the emotional aspect of asset allocation and avoids trend chasing behavior.
Step 2: Asset Allocation
Using the risk, return and correlation assumptions from step one, our objective is to optimize the asset allocation and build “efficient portfolios” from the selected asset classes. Generally, investors expect to receive a higher return for assuming additional levels of risk. Efficient portfolios are designed in an attempt to maximize the return potential at each level of risk.
Step 3: Investment Selection
We utilize both active and passive investment options in attempt to minimize investment expenses and maximize your investment return. When it comes to searching for active investment managers, only managers that meet stringent quantitative and qualitative requirements are utilized. We look for managers that add value through their investment selection process, rather than the effects of the market.
Step 4: Monitoring
We continually monitor every element of the process to ensure that we are providing an high quality program. This monitoring includes:
- Periodic risk assessment to identify changes in your objectives.
- Updated assumptions to maintain optimized asset allocations.
- Ongoing investment manager search and selection in an effort to ensure high quality active investment managers.
Source: *The Average Equity Investor and inflation data comes from “Dalbar's 22nd Annual Quantitative Analysis of Investor Behavior (QAIB) study”. Average Equity Investor performance is calculated using results supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions, and exchanges. Results capture realized and unrealized capital gains dividends, interest, trading costs, sales charges, fees, expenses, and other costs. Dividends are not guaranteed, and a company's ability to pay dividends may be limited. Fund Sponsors, data for the participants in the peer groups come from four primary sources; Callan clients, BNY Mellon, Investorforce and Callan non-clients. The Total Fund Sponsor Database consists of return and asset allocation information for Corporate Pensions Funds, Endowment/Foundation Funds, Public Funds, and Taft-Hartley Funds. The Public Fund Sponsor Database consists of return and asset allocation information for public pension funds at the city, county, and state level. The Corporate Fund Sponsor Database consists of return and asset allocation information for a wide variety of corporate pension funds. The Endowment/Foundation Fund Sponsor Database consists of return and asset allocation information for endowments and foundations. The Taft-Hartley Fund Sponsor Database consists of return and asset allocation information for Taft-Hartley union pension funds.