Equities
U.S. equities are an important component of a diversified portfolio, because they are an excellent source of capital appreciation, growth of income and protection against inflation.
We select from a range of large-cap, mid-cap and small-cap equities. As a rule, combining these three different equity classes can reduce the overall volatility of the portfolio. For all equity investments, we evaluate earnings and dividend growth, valuations and financial quality.
We also may choose from international equities, representing both the developed and emerging markets. Nearly half of the world’s equities are outside of the U.S., and international markets have matured over the past 20 years. Overall, stock valuations tend to be more attractive overseas than in the U.S.
As a result, international equities can play a complementary role to domestic equities and help create a more diversified and efficient investment portfolio.
Fixed Income
Fixed income securities offer a predictable source of income. They also are highly liquid, and can be an effective vehicle for capital preservation. As part of an overall asset allocation strategy, they serve as a buffer against the volatility of other types of assets.
In constructing our clients' portfolios, we choose securities from sectors with the most attractive relative valuations. We also structure fixed income portfolios to to coincide with the client's liquidity needs and income requirements.
We also believe that the global bond market offers a compelling investment opportunity while providing further diversification within a portfolio. In the past, the U.S. dominated the global bond market, and markets outside the U.S. were relatively small and inefficient. Today, non-U.S. bonds account for more than one-half of the global fixed income market.
By spreading fixed income investments among countries at different stages of the economic and interest-rate cycle, investors can increase diversification and reduce the likelihood that portfolio assets will all move in tandem.
Alternative Investments
Alternative investments allow investors to seek value outside of traditional markets. Non-traditional investments also are a tool for diversification, since their returns typically are not strongly correlated with those of traditional asset classes.
Among the alternative investments we consider are real estate investment trusts, private real estate, private equity, hedge funds, timberland, and commodities and managed futures.
We carefully evaluate and monitor alternative investment strategies. To mitigate risk associated with alternative investments, we recommend significant diversification of holdings for our clients.