INVESTMENT STRATEGY

We implement hedged strategies (also known as absolute return, low volatility, zero-beta or non-correlated strategies) in separately managed accounts.  The type of strategies we use for our clients have historically been reserved for wealthy individuals through Hedge Funds or Private Equity offerings.  It is our goal to make our strategy available to all investors regardless of net worth.  

We have four primary institutional strategies designed for specific risk tolerance (Aggressive and Conservative) and account type (IRA and Taxable).  Our four alternative investment strategies can be broadly classified as follows:

For performance statistics on all of our strategies, click here

We strive to capitalize on the same investment themes across all of our strategies.  While our strategies are non-correlated to the equity markets, they are correlated to one another.  We balance our clients’ assets across our various models to achieve the risk tolerance that best fits their individual situation.  

The following information provides the salient attributes one should know about all of our strategies.  (You may scroll through all the text or use the links immedatiatley below to jump to a particular section.)

• Investment Strategy Classification:  Alternative Investments (i.e. non-correlated to equity markets)
• Investment Strategy Defined:  Global/Macro, Dynamic Long/Short
• Account Structure:  Separately Managed Margin Accounts traded on a discretionary basis.
• Prototypical Clients: We work with both individuals and institutions who are seeking non-correlated returns for various reasons

Strategy Classification:  Alternative Investments
Alternative Investments typically refer to an asset class or investment strategy that is non-correlated to broad equity or bond indexes.  In other words, our strategy does not need the stock or bond market to appreciate in order to make money.  Alternative Asset classes are growing in popularity as traditional investments have failed to deliver positive real returns in the past 12 years.  

Our Mission is to provide our clients with the greatest sense of financial security possible.  At the beginning of the decade, we foresaw many of the challenges facing our economy and stock market and knew that we would need to provide our clients positive returns in all market climates in order to accomplish Our Mission.  

Alternative investments can be divided up into two main categories; alternative asset classes and alternative investment strategies.  

Alternative Asset Classes

• Real Estate
• Commodities
• Currencies
• Foreign Bonds
• There are other types of asset classes that may be categorized as altnerative such as Collectibles, Venture Capital and Entertainment Funds (i.e. movie and concert production.)

Alternative Investment Strategies

• Global/Macro:  Top-down approach to investing in securities worldwide seeking to take advantage of global economic trends.
• Long/short Funds:  Funds that take both long and short positions in equities with the objective of making a gain when their long positions outperform their short positions.  A subset of this category are funds that implement “Paired Trades” which take a long and short position in two similar securities.
• Arbitrage Funds:  These funds seek to earn risk-free profits by identifying arbitrage opportunities.
• Private Equity Funds:  Invest in private companies that do not trade publically which results in liquidity issues.
• Managed Futures: Commodity pools that take both long and short positions in commodity futures, options and other types of derivatives.
• Event Driven:  Investing based on “micro” events such as changes in regulation, M & A, ect.

Our Investment Strategy Defined:  Global/Macro, Dynamic Long/Short with an Analytics Overlay
The following explains the various components of our Alternative Investment Strategy:

Global:  we can go anywhere, anytime and invest in anything.  We are not limited to stocks and bonds such as a typical
Advantage:  Limitless opportunities for gains.

Macro:  Short for Macroeconomic.  Macro investors take a top-down approach examing in the big picture an allocating a capital based on themes which provide compelling return vs. risk opportunities.  While Macro investing has been around for well over 100 years, it lost favor in the Tech and subsequent Housing boom.    Conversely, bottom-up managers, such as Warren Buffett and Bill Miller, look for under valued individual stocks.  
Advantage:  Opportunities in all market climates.  Strategy does not have to be correlated to equity markets nor is its gains limited by stock market movements.

Long/Short:  We put on long and short trades which can profit regardless of the direction of the security.  The end result is a strategy that is far less volatile and provides more consistent returns.  
Advantage:  Lower volatility and opportunity to make money in both up and down markets.

"Dynamic" Long/Short:  The “Dynamic” means that we are not married to a specific long/short ratio.  Some firms prefer to remain “market-neutral” or carry a slight long-bias.  We feel that by not limiting ourselves to a specific ratio, it doesn’t cap the opportunity in our strategies when the market is driving higher.  
Advantage:  Ability to take advantage of the long-bias in most asset classes

Analytics Overlay (MAP):  We utilize a series of algorithms to calculate several key price points for every security in our portfolios.  A few of the price points include stop-loss levels on both long and short positions as well as entry and exit targets.  We refer to our system as The MAP which stands for Market Analytics Program.  We plug securities that are part of our Global/Macro themes into The MAP and it determines entry and exit prices that are advantageous providing us with attractive return/risk opportunities.  
Advantage:  Insure that losing positions do not wreck the returns for the entire portfolio.  The nature of Long/Short investing means that there will always be losing positions in the portfolio os our MAP insures that none of our losing positions have a major impact on the entire portfolio.

Account Structure:  Separately Managed Margin Accounts traded on a discretionary basis.

Separately Managed Accounts:  Every single one of our clients’ accounts I held in a separate account owned and controlled by the client.  Our firm is granted limited power of attorney on the account to process trades, execute administrative functions for the client and deduct our fees.  We authority does not extend beyond these functions.  

Transparency: We strive to provide our clients with the greatest level of transparency along with the highest level of execution – all at a solid value.  All of our clients can access their account 24/7.

Liquidity:  We do not require any sort of “lock-up period” or notice for closing out an account.  All positions in the account are held in publically traded securities and may be liquidated during market hours.

Risk Management:  We place an extremely high emphasis on Risk Management or as we prefer to call it “Loss Management”.  Every investor who has ever bought or sold a stock has experienced a run-a-way loss.  We have implemented tools to prevent these types of losses.    

Control:  Since the client owns the account, the client ultimately controls the account.  We typically make all the investment decisions for our clients but at any time, the client may trade his or her own account.

Institutional Trading Privileges:  The majority of our strategies have institutional trading privileges which provide us a remarkable advantage in managing our clients’ accounts.  Rather than only attaining access to stocks, bonds and mutual funds traded on US Exchanges, we can invest our clients in any electronically traded security worldwide.

Discretionary Trading:  Our clients grant us discretionary trading authority over their accounts so that we can execute all the trades which provides us with greater efficiency and allows us to keep our fees low.

Fees:  We charge between 1.5% - 2.0% for our strategies.  We invest our clients accounts directly into the securities so there is not any additional management fees on most of our investments.

Our Prototypical Client fall into one of two categories:

• Investors seeking to properly diversify an existing portfolio invested in traditional investment strategies by allocating capital to our non-correlated strategies.
• Investors who are skeptical of Wall Street’s buy-n-hold philosophy and are searching for a better and more consistent way to earn money in the capital markets.

Clients with IRA Accounts:  We are the only firm that we know of that is providing effective hedged strategies inside of an IRA account.  We have established institutional trading privileges for our IRA accounts providing us with far better execution and more greater access to securities that a traditional retail IRA.