Investments which allow enhanced return potential on excess cash balances while maintaining negligible risk to principal. Allocation to this Sub-Portfolio may rise in anticipation of upcoming withdrawals from the portfolio, or to reduce overall portfolio risk and be able to take advantage of anticipated investment opportunities.
The purpose of this sub-portfolio is to generate stable income and reliable cash flow, reduce risk of the overall portfolio, and to serve as a time buffer to allow the rest of the portfolio the opportunity to grow in value over time. This sub-portfolio is also designed to protect the client’s other sub-portfolios against volatility and sequence of returns risk in case downturns occur at a time when withdrawals are planned. This sub-portfolio will consist of liquid investments that seek to deliver periodic interest payments and predictably-timed return of capital such as for example when bonds mature.
This sub-portfolio is employed for taxable accounts and high income-tax bracket investors. Similar to the Income sub-portfolio, the purpose of this portfolio is to generate stable income and reliable cash flow, reduce risk of the overall portfolio, and to serve as a time buffer to protect the rest of the portfolio against volatility of other investments and corresponding sequence of returns risk in case the downturns occur at a time when withdrawals are planned. This sub-portfolio will consist of liquid investments that are designed to deliver periodic interest payments and predictable return of capital for taxable rather than tax-advantaged accounts such as IRAs, Roth IRAs, and other types of tax-deferred or tax-advantaged investment accounts.
This sub-portfolio is focused on generating a return with lower risk and volatility than the overall stock market with substantial portion of the return being paid out as income on periodic basis. Examples include stock dividends and bond interest payments.
Growth is a diversified and return-focused sub-portfolio which includes investments in global stocks, high yield bonds, and other traded investments with risk-return profile of stock-like investments and risk, volatility and appreciation potential of the overall stock market. This sub-portfolio will employ results of evidence-based objective research, most of it conducted by academic researchers including many Noble-prize winning economists, demonstrating that benchmark outperformance can be achieved by tilting or overweighing the portfolio to specific investment strategies or factors along the economic cycle as illustrated in the sample below.
Source: AQR Capital Management
These investments will also be managed with the goal to enhance long-term returns by reducing large losses with appropriate position management, including growing or reducing the size of each specific investment as well as exiting investments as conditions change. We utilize a number of historically effective technical tools, including volatility measures tested by accomplished researchers including those at Harvard University and illustrated below, seeking to reduce exposure to certain risk assets based on lower projected returns.
It is our intention to significantly exit at-risk investments to avoid large sell-offs resulting in high level of losses in the sub-portfolio once the ongoing major uptrend is broken. In an example of US stocks as illustrated below, we may sell 20% of the US stock portfolio and re-invest the proceeds into cash-like, US treasuries and other low-risk investments once the 50-day moving average significantly crosses below the 200-day moving average. Up to an additional 50% of the sub-portfolio may also be re-positioned to cash-like, US treasuries and other low-risk investments once the 200-day moving average is significantly breached to the downside. Pending market conditions, we would re-enter the market in a similar fashion, increasing it by 20% once the 50-day moving average crosses over the 200-day average to the upside, and up to another 50% once the market itself significantly moves and holds above its 200-day moving average. We also evaluate other indicators including the slope of these moving average curves to determine the strength and speed of the trend to finalize our decisions.
S&P 500 200-Day Moving Average
All assets, all strategies, traded securities to include global high potential return investments, including growth stocks and other high expected return strategies including select opportunistic investments. This sub-portfolio will target a higher risk-growth balance than the Growth Sub-portfolio and as such is more likely to outperform the average US stock market return over a market cycle but also with higher level of risk and volatility than the overall market. Similar to Growth Sub-portfolio, these investments are designed to be risk managed to enhance long-term returns by reducing large losses with appropriate position management, including growing or reducing the size of each specific investment, as well as exiting investments as conditions change.
This sub-portfolio will include traded securities in alternative asset classes and strategies, as well as multi-asset, cross-asset and multi-strategy investments. The purpose of this sub-portfolio is to reduce the risk and enhance returns of the traditional stock and bond portfolio by incorporating assets and strategies that are less correlated or less volatile or have higher return potential, especially under certain market conditions, such as for example when traditional stock and bond markets appear to be at risk due to deteriorating economy, high valuations, shrinking profits and high volatility accompanied by declining price trends.
This is a fully customized sub-portfolio of non-traded, limited entry and exit, long-term investments for high net worth investors that will be considered as they become available in appropriate amounts for each specific client to enhance the risk-return profile of their overall portfolio as well as satisfying their needs for additional diversification, income, growth and risk reduction. Examples include non-traded real estate investment trusts and non-traded business development companies.
This sub-portfolio will be customized as needed to reflect individual client’s requirements for values-based investing, including Socially Responsible Investments (SRI) and Environment, Social and Governance (ESG) Investments.
In cases where it offers considerable advantages for the client, this sub-portfolio will be tailored specifically for individual clients, based on their need for pension-like lifetime income, accumulation, tax-efficiency, liquidity and other requirements to enhance their risk-adjusted goal attainment.
Management of significant individual security positions, primarily stocks, especially those with large embedded taxable gains, restricted or control stock, founder’s stock, preferred convertible debt, and compensation related stocks and options. May involve block trading, selling programs, tax management, compliance-based reporting, exchange funds, stock protection funds, prepaid forwards, structured products, and options strategies, as well as securities-based lending.
Highly specialized limited-liquidity products that may offer client desired features such as principal-protection, defined risk, exposure to a specific investment strategy and many other individualized characteristics. These could be structured products offered to investors without limitations and can even be custom structured for a specific client by a financial institution.
An actively managed client-specific selection of individual stocks, for example dividend paying and / or dividend growing stocks, utilities, opportunistic investments and others including combining multiple strategies. This portfolio consists primarily of individual securities and / or separately managed accounts (SMAs).
Life Insurance, Long Term Care, Healthcare / Medicare, Business, Other. Individual structured and customized insurance products that will protect the portfolio from unexpected and possibly catastrophic liquidation.
Securities-based lending, life-insurance premium financing, and other financing strategies.
1. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
2. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in an index. Past Performance does not guarantee future results.
3. Investing in alternative investments is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investments.
4. Investments in REITs are subject to the inherent risks of direct investment in real estate such as price fluctuation, liquidity, and concentration risks. Investments in Non-exchange traded REITs are subject to substantial risks. These risks include, but are not limited to the following: The possibility that sale or redemption may be for more or less than the original amount invested, the absence of a public market for these securities, limited transferability and lack of liquidity, the possibility of substantial delay in making distributions, payment of significant fees to affiliated sponsors, advisors and general partners, no assurance that the stated objectives will be met, and, special risks associated with investing in real estate such as: The possibility of declining real estate values, the possible lack of availability of mortgage funds changes in interest rates, the possibility of declining economic conditions, overbuilding, extended vacancies of properties
5. Bonds are subject to interest rate risk. As the prevailing level of bond interest rates rise, the value of bonds already held in a portfolio declines. Portfolios that hold bonds are subject to declines and increases in value due to general changes in interest rates.
6. Stock/Equity investors should carefully consider risks such as market risk when investing. There are no guarantees when it comes to individual stocks. Any company may go bankrupt, in which case your investment may be worth nothing.
7. Strategies may employ an investment in annuities. Early withdrawals from these long term investments may result in surrender penalties. Withdrawal prior to age 59½ may be subject to a 10% federal tax penalty. Guaranteed rates are backed by the claims paying ability of the issuer.
8. Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns.
9. Investing in non-traded BDCs are subject to significant risks, including the risk of a substantial loss of investment. Other risks include limited operating histories, reliance on the advisors, conflicts of interests, payment of substantial fees to the advisors and their affiliates, limited liquidity and liquidations at less than the original amounts invested. Non-traded BDCs are not listed on a securities exchange, and no secondary market is expected to develop. Thus, it will be difficult to sell shares. An investment in a non-traded BDC is not suitable for all investors. Investors should consult a financial professional to determine whether risks associated with an investment in the shares are compatible with their investment objectives. This material is for educational purposes only and does not constitute a solicitation of an offer to sell/buy any particular non-traded business development company (BDC). Such an offering is made only by a prospectus. For more information, please carefully read the prospectus, which you can obtain from your financial advisor. You should read the prospectus carefully in order to fully understand the objectives, risks, sales charges, fees and expenses before investing or sending money. There are no assurances that offerings will meet their stated objectives.
10. Options involve risk and are not suitable for all investors.
Mutual funds, exchange traded funds (ETF), and variable annuities are sold by prospectus. An investor should carefully consider the investment objectives, risks, charges and expenses of a mutual fund, ETF, variable annuity and the variable annuity’s underlying investment options before investing. This and other information is provided in the product and underlying fund prospectuses. Contact your advisor or the investment company to obtain a copy of these prospectuses, which should be read carefully before investing.