Our Asset Management Services
Before employing any firm to manage your assets, it’s a good idea to more fully understand the methodology behind their decision making process. In developing an investment strategy for our clients, we employ a Six-Step Management Process.
First, We Develop An Investment Policy Statement
In consultation with our clients we develop an Investment Policy Statement based their objectives, risk tolerance and time horizon. This policy establishes reasonable objectives, expectations and guidelines, and creates the framework for a long-term asset allocation strategy with a level of risk suitable for the client. More than anything, the policy establishes standards for making portfolio performance evaluations, and so promotes more effective communication with our clients in difficult investment conditions.
We Analyze The Current Portfolio And Compare The Results With Our Investment Policy
After creating this roadmap based on newly determined tolerances to risk and expectations, we then analyze our client’s current investment classes to establish how they differ from the proposed investment plan, how current expected returns differ from the plan, and how much risk is unnecessary or un-rewarded within the current portfolio. In consultation with our clients, we then decide which investments and asset classes to retain and which assets classes and investments to add or delete, at the same time coordinating and integrating all client accounts into one larger portfolio as part of an overall asset allocation strategy.
We Reallocate Across Globally Diversified Asset Classes
From our perspective, the purpose of allocation is to seek to reduce risk, not necessarily to increase return.* Investments that are concentrated in specific sectors may often add risk with no additional expected return. This is also true of national economies. While America slipped into recession in 2000 until 2003 and again in 2008 and domestic portfolio returns suffered, many other nations around the world were not as severely impacted. A global asset allocation strategy invests a portfolio in carefully defined proportions across different sectors and throughout different economies in order to reduce overall economic risk.** Investing globally helps reduce risk even if return is not increased. This is because the reliance on the U.S. economy alone for portfolio growth is reduced. Wherever possible, we utilize U.S. domiciled foreign and global no-load funds, as well as exchanged traded funds and some ADR’s (American Depository Receipts) as an integral part of our diversification strategy.
We Seek To Add Value Through Careful Portfolio Selection
In constructing our portfolios we seek out fund and managers that best allocate asset classes across the true dimensions of risk. We carefully screen and select funds and managers most likely to provide a superior expected return within the dimensions of risk permitted by the investment policy. Research has shown that active management often produces superior returns to passive index investing. We therefore employ certain trading techniques that seek to enhance returns where appropriate. |
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In constructing our portfolios we seek out fund and managers that best allocate asset classes across the true dimensions of risk. We carefully screen and select funds and managers most likely to provide a superior expected return within the dimensions of risk permitted by the investment policy. Research has shown that active management often produces superior returns to passive index investing. We therefore employ certain trading techniques that seek to enhance returns where appropriate.
We then Implement And Rebalance When Necessary
As asset classes change enough to become inconsistent with the investment policy, the portfolio is rebalanced in consultation with our clients, consistent with the investment policy and based on current market conditions. Generally, decisions regarding rebalancing are discussed with clients at regular meetings or as necessary if the client’s circumstances change.
We Report Results And Monitor Against Benchmarks Indexes
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We provide written quarterly reports that compare investment performance to the major benchmark indexes,*** or, particularly in the case of defined benefit pension plans etc., specifically developed benchmarks as set forth in the Investment Policy Statement. Periodic reporting allows our clients to measure the success of their plan within a reasonable timeframe. |
Our client’s portfolios are monitored to ensure that the underlying asset allocation is consistent with the Investment Policy Statement, and, that each asset class represented still maintains its specific style and strategy. We believe asset allocation and a more dynamic approach to investing is the essence of portfolio management. As fiduciary advisers we also listen to our clients and seek to understand their desires, their expectations and their tolerance for risk in order to design and implement strategies consistent with their expectations, not ours.
Our more conservative clients are educated to understand that their projected portfolio returns may not be as stellar as other more aggressive clients. They also understand that their projected portfolio losses in any market downturn may generally be lower because of adequate diversification among asset classes that are not correlated with the stock market. Our more aggressive clients on the other hand, fully understand that in seeking higher expected returns over time, they must be willing to bear a far greater level of risk. Greater risk generally requires an adequate timeline for investing, a much higher discipline in investing and a willingness to "ride out" market fluctuations that often produce considerable losses as well as, potentially, superior gains in volatile markets. The portfolio structure decision as described in the investment policy statement is among the most important decisions our clients make in their asset management plan. The client’s understanding of their exposure to risk, what overall asset classes the plan holds and in what proportions, may well determine how well the plan performs relative to the overall markets and most importantly, relative to our client’s expectations. We ask a LOT of questions when we first decide to accept a new client. Understanding our methodology in portfolio construction and overall management will quickly lead to an understanding as to why we ask so many questions.
If you are interested in becoming a client of Taylor & Associates, please contact us and thank you for your interest in our firm.
* Investors need to be aware that no investment plan/asset allocation can completely eliminate the risk of fluctuating prices and uncertain returns
** International investing entails special risk considerations, including currency fluctuations, lower liquidity, economic and political risks and differences in accounting methods.
*** An index is a hypothetical portfolio of specific securities (Common examples are the Dow Jones industrial, NASDAQ 100, Russell 2000 and the S and P 500) The performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and should only be compared with securities with similar investment characteristics and criteria. Investors cannot invest directly in an index. Past Performance is not indicative of future results.