Portfolio Management Process

Over the past twenty-five years we’ve learned a lot about how to effectively manage portfolios of preferred securities and we’ve designed the firm to conform with this knowledge.  We have a very flat organization which promotes broad participation in the investment decision making process.  Each of the firm’s principals is actively involved in every aspect of managing client portfolios.  Our process can be broken down into four functional areas: client communication; credit research and analysis; investment strategy; and trading and portfolio management.

Client Communication

We work closely with our clients to gain an in-depth understanding of their investment objectives.  The nature of the market for preferred securities often requires investors to consider issues that don’t come up with other investments.  It is important for us to obtain a clear understanding of each client’s tax situation, time horizon and risk tolerance.  Once we’ve gone through an extensive checklist of items, we are able to develop investment guidelines which reflect the specific circumstances of the client. 

Once the portfolio is up and running we provide the client with regular statements and reports.  Our monthly client reports are designed to provide the client with everything they need, from an executive level performance summary to a complete breakdown of information needed by the accountants.  

We also communicate whenever circumstances warrant. This is one reason we have limited the number of our clients.

Credit Research and Analysis

Fundamental credit analysis is the foundation of our investment process. Our team of analysts work only for our clients and have no conflicts in doing their jobs – moreover, because they don’t provide credit research on other asset classes, they can focus on the specific risks of preferred securities.  Our research team is based in Summit, New Jersey, and their location has some real benefits.  First of all, they have access to the tremendous resources available in the New York metropolitan area, such as one-on-one meetings with many of the companies we cover.  In addition, we have made a concerted effort to insulate the process of financial analysis from the implementation of our investment strategy.  It is our belief that that by separating credit analysis from market valuation, we can get truly unbiased assessments of a company’s financial strengths and weaknesses.

Investment Strategy

As anyone who has tried it knows, managing portfolios of preferred securities successfully requires a great deal of flexibility.  Our approach is to establish targets for each portfolio based on the client’s objectives and our analysis of overall market conditions.  These targets are continuously evaluated by every one of our investment professionals.  Implementation of our general strategy happens on our trading desk, where we can react quickly to market opportunities.  Of course, there is a lot of “feedback” in the system, and market opportunities play a big role in setting strategy.  

Trading and Portfolio Management

In order for us to successfully implement our portfolio strategy, we have developed a variety of tools to analyze markets on all types of preferred securities.  Since the terms of each preferred issue can vary tremendously from one to the next, we start with a comprehensive  database of the preferred universe.

From our proprietary database, we can analyze and compare individual issues, as well as evaluate each portfolio from a number of perspectives.  We also love to “horse-trade” so getting our clients the best possible executions appeals to innate sense of larceny!