Investment Philosophies
Balanced
- Our asset allocation process is active.
- Commonwealth Investment Management will actively adjust the portfolio asset allocation in two ways:
-
- First, because the value of assets can change given market conditions, we will re-adjust the asset mix if, and when, the top or bottom end of the equity policy range is met.
- Second, we will make periodic, but usually infrequent, adjustments based on an evaluation of global macro-economic conditions and relative valuation among asset classes compared to historical norms.
- Such adjustments will be predicated on an analysis of interest rates and the shape of the yield curve, GDP growth, monetary policy, P/E ratios, earnings growth rates and inflation expectations.
- Commonwealth Investment Management’s process incorporates the ideas from our Investment Policy Committee.
Fixed
Risk Controls
Our portfolio construction process emphasizes diversification, risk controls, liquidity and high quality.
Value Added
Value is added by sector emphasis, duration adjustments and individual security selection. Sector weights are determined by an analysis of sector spreads to historical norms. Duration is adjusted based on a macro analysis of the economic landscape as well as on an assessment of the monetary policy cycle. Corporate securities are selected based on credit quality, spread relationships and financial statement analysis.
Fixed Income Investment Philosophy
- We believe that Fixed Income is a relatively conservative asset class that over time outperforms cash and inflation but with substantially less volatility and risk than equities. Therefore, we are focused on capital preservation.
- Portfolios are diversified across sectors. We utilize U.S. treasury, agency, corporate, CMBS, and MBS securities.
- Value is added through sector emphasis, duration adjustments, yield curve positioning and security selection.
- Commonwealth Investment Management’s process incorporates the ideas from our Investment Policy Committee.
Equity
Risk Controls
Our portfolio construction process emphasizes diversification and risk controls. We constrain portfolio tracking error (TE) versus the benchmark by systematically measuring TE on an ongoing basis. This process reduces relative volatility and minimizes the effects of a “fat tail” or extreme market outcome.
Value Added
We utilize both fundamental and technical analysis to select securities. Our process emphasizes identifying two distinct sets of circumstances which we believe lead to outperformance. First, we seek companies with strong relative price performance, increasing earnings estimates, a defensible competitive advantage and growing end markets. Secondly, we seek undervalued companies with low expectations that are likely to benefit from an important catalyst such as an earnings surprise, an analyst upgrade, a new product or an acquisition. Key data we use include various momentum indicators, earnings revisions and estimates and valuation measures such as P/E, PEG and P/S. Our research is supplemented with outside research from carefully selected analysts.
Equity Investment Philosophy:
- Our diversified approach and utilization of risk controls limits the relative volatility of the portfolio.
- Our style involves a disciplined monitoring process that controls portfolio tracking error versus the benchmark.
- We adhere to our style and consistently apply our process.
- Commonwealth Investment Management’s process incorporates the ideas from our Investment Policy Committee.
- Sector and industry analysis identifies those areas we feel provide opportunities for additional return above the benchmark.
Schedule a Consultation
Please don’t hesitate to contact Commonwealth Investment Management today to arrange for an initial consultation.
