Investment Management Process
In order for SJF Investment Management to determine the most appropriate investment strategy for our clients, we follow a process.
Starting with our initial exploratory meetings, you will feel the benefits of working with an independent firm. We strive to acquire a strong grasp of each prospective client's financial situation, risk aptitude, investment experience, and goals.
We will get to know each other, this mutual intimate understanding is important to us, our clients and is essential for us to serve as stewards of your wealth. There is confidence that is achieved from getting to know each other. Once we are comfortable with one's balance of expectations and resources, we take the time to ensure our wealth management and investment philosophy provide a good fit for you and your family.
The process steps are as follows:
Client Discovery: Its starts with a simple conversation. This first step in the process and is a critical part to establish a long term investment strategy. We spend a significant amount of time getting to know each other. It is a time when you ask us questions and express concerns. It is a time when we challenge ourselves—and we’ll challenge you—to think clearly and tell your story. We explore your vision for your ideal life, your financial commitments, and how you view—and experience—risk.
Risk Evaluation: We spend a good amount of time evaluating your attitude toward risk. At SJF Investment Management we find it is crucial that we determine the level of risk a client would like to take. We emphasize earning a superior rate of return is desirable but managing risk exposure is the most important consideration in portfolio design. The client’s expectations of performance are discussed and should be realistic. By knowing your risk tolerance in advance, you can better control your emotions and stick to your long-term strategy during the inevitable bumps along the way.
Asset Allocation Strategy: The next step in the process is to create an asset allocation strategy that aims to balance risk and reward by aligning a portfolio's assets according to the client’s goals, risk tolerance, liquidity needs, expected returns and time horizon. Using such variables, our research models and analysis we design a client’s portfolio. Using a core (strategic allocation) and satellites (tactical allocation) the clients assets will be divided into different asset categories, such as stocks, bonds, and cash . We take this process a step further to achieve diversification. For example, dividing a client’s portfolio to have different types of stocks, such as large cap, small cap and international. Another step further, within those divisions, we can select different sectors (i.e., technology, healthcare, telecommunications) and different industries within the sectors. The clients’ portfolio will be dynamic and research driven using LPL Research and third party research and analytical tools. For example, if research believes that the market has more downside risk than upside opportunity, we will lower the overall beta of the portfolio and shift to sectors that historically outperform when the market declines. The goal is to capture upside and limit downside risk. The goal is simple as it sounds - manage the portfolio’s asset allocation to take advantage of opportunities, avoid unnecessary risks and protect portfolio values.
Strategy Implementation: Over a period of 30 to 90 days we will begin to implement the asset allocation strategy (based on the economic outlook and market conditions). In this step we are in regular contact with the clients, ensuring they are aware of all portfolio changes and updates.
Monitor & Communicate: SJF Investment Management will constantly monitor the client’s portfolio. We will provide the clients with regular monthly updates and reporting on a quarterly basis. We encourage clients to ask questions and express their thoughts or concerns.As our relationship with you progresses based on market conditions, we will rebalance or identify any adjustments that may need to be made to the portfolio.
Investing involves risk including loss of principal. No strategy assures success or protects against loss. Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently.
SJF Investment Management investment philosophy is best described as research driven portfolio design with a core and satellite investing approach. We leverage LPL Financials leading research, as well as third party research for analysis and due diligence. Starting with the clients’ unique objectives and concerns in mind, we work to create a customized portfolio incorporating both, the Core Portfolio (Strategic Asset Allocation) as well as the Satellite Portfolio (Tactical Asset Allocation).
To understand this strategy, visualize the wheel of a bicycle:
Core (Strategic Asset Allocation)
The hub of the wheel represents your core portfolio (Strategic Asset Allocation). This is the largest part of your portfolio and is composed of mostly of diversified US large cap stocks and US bonds.
Core portfolios or “the hub of the wheel” can come in many shapes and sizes depending on the needs, timeframe and personality of the client, but as the name implies, core investments are the building blocks and in many cases suffice as an appropriate portfolio. Typical core investments might be a portfolio of large cap stocks, bonds (taxable or tax free), and Exchange Traded Funds (ETFs). The core investments would be held for longer time periods and rebalancing of the allocation takes place once a year. They may make up anywhere from 70-90% of the overall allocation depending of the client's experience, sophistication, risk tolerance, time frame, and objective.
Within this strategy, for more conservative portfolios and clients taking regular distributions we implement a profit-taking strategy. Our objective is to be proactive and understand our clients short term and long term liquidity needs in advance by creating a cash position before it is absolutely necessary.
Satellite (Tactical Asset Allocation)
The individual spokes of the wheel, represent your satellite portfolio Satellite Portfolio (Tactical Asset Allocation). Based on our current research and market trends, this has a narrower focus on a particular theme, sector, region or opportunity.
Satellite portfolios or “the spokes of the wheel” are typically the more targeted part of the portfolio and are designed with two goals: (1) reduce market correlation; and (2) provide additional returns (or alpha) above the market returns of the Core portfolio. Separately, Satellite investments typically carry higher risk; however, they can moderate volatility when added to a core portfolio.
This allocation should work best in market environments that offer consistent identifiable trends. However, during times of a flat trendless market, a tactical tilt may bring little to no benefit. Satellite portfolios tend to have a narrower focus on a particular theme, sector, region or opportunity, for example healthcare, technology, energy or ever exposure to gold or oil.
Generally speaking, they would have shorter expected holding periods than the core holdings
The core and satellite investment approach is meant to minimize risk and maximize return through asset allocation and diversification. Portfolios typically contain between 30 to 35 positions to further diminish individual security risk.
Investments mentioned have various risks including loss of principal and may not be suitable for every investor. No strategy assures success or protects against loss. Tactical allocation may involve more frequent buying and selling of assets and will tend to generate higher transaction cost. Investors should consider the tax consequences of moving positions more frequently. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
We conduct research the traditional way, on a security-by-security basis.
Analyze global themes and secular trends as well as current macro-economic conditions and outlook.
Analyze sectors and industries to determine which ones should be positively impacted by major global themes and will prosper or be defensive in the forecasted economic environment.
Screen and rank securities based on appropriate criteria. Perform detailed security analysis by applying extensive qualitative factors.
Pool of high quality securities that if appropriate may be added to a client’s portfolio.