 Successful asset management
requires the careful integration of two separate
tasks:
-Portfolio
Design evolves from a mutual
understanding of the rewards and risks of
investing. The result is a
"blueprint" which specifies the
percentages of the various asset classes
which will be selected to make up the
portfolio.
-Implementation
of the portfolio design is accomplished by
employing several carefully selected asset
managers, each a specialist in a specific
segment of the capital markets.
Portfolio design is the more
critical of these two steps. It determines the
risk and return characteristics of the portfolio
and the most effective strategies to reach the
client's goals.
-However,
no matter how well designed, a portfolio will
not perform effectively if poorly
implemented. Highland Financial, Ltd.'s
implementation process concentrates on the
selection of the top asset managers adjusted
for risk in each capital market segment
(within the client's risk guidelines), rather
than on a single organization that
crosses all asset classes.
Setting Objectives and
Portfolio Design
- Before
any investment strategy can be developed,
mutual understanding must take place.
Highland Financial, Ltd., must know and
understand the client’s:
- Risk Tolerance
Levels
- Investment goals
- Liquidity
requirements
- Time horizons
- Other unique
needs and circumstances
- Tax Planning
- The
client, on the other hand, must
understand:
- Fundamentals of
portfolio design
- Risks and returns
associated with the various asset classes
This knowledge provides the client
with realistic expectations and added
confidences during the investment
process.
- After
a thorough discussion with the client,
Highland Financial, Ltd., will develop a
plan detailing the specifics of the
portfolio design to provide:
- A level of return
consistent with the client’s risk
tolerance.
Selection and Implementation
- The portfolio design must now be implemented. For each asset class, one or more investment managers are usually selected. We may select several managers whose investment approaches are best suited to the client's portfolio objectives.
Each investment manager is selected using a combination of the following criteria:
- Low expense ratio
- Good
shareholder communications
- Low
price earnings ratios
- Management
longevity
- Low investment risk based on Beta and standard deviation. Beta is a measure of the investment's sensitivity to market movements. By definition, the Beta of a benchmark is 1.0, so, typically, a Beta higher than 1.0 may have higher risk than the benchmark and a Beta lower than 1.0 would have lower risk than the benchmark.
- Analysis of current and historical returns, including Alpha results. Alpha measures the difference between the investment's actual returns and its expected performance given its level of risk as defined by Beta. Even with all this, past performance is not a guarantee of future results.
There is no assurance that the philosophies and strategies employed by the firm will lead to successful investment results. Securities investments are subject to fluctuations in value and possible loss of principal
Monitoring and Evaluation
throughtout the entire investment management
process, the client's account is carefully
monitored and evaluated.
- Manager
Performance
- Comparison
of Portfolio
- Acceptable
Risk Levels
- Assessment
of Client Needs and Suitability
These
evaluations are reported to the client at regular
intervals in a form which provides a permanent
record of the decision-making process and the
results achieved.
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