A major pillar of comprehensive wealth management is investment management. At Peltzer Capital Management LLC we seek to provide you with consistent, competitive, investment returns over a market cycle by capitalizing on a range of financial opportunities. We limit risk to a level with which you’re comfortable, avoiding speculative investment choices. We pursue this goal with diversification, disciplined management and sophisticated market selection.
The following tenets are key to our investment approach:
Our philosophy is grounded in modern portfolio theory and asset allocation theory (Brinson, Hood, and Beebower, 1986). Modern portfolio theory demonstrates that there is a relationship between risk and return and when non-correlated assets are added to a portfolio, a higher portfolio risk-adjusted return is attained. Asset allocation theory identifies three sources of return: asset allocation, security selection and timing. The asset allocation decision is shown to be by far the largest determinant of variation in returns. Therefore we focus most of our attention on portfolio composition.
The asset allocation decision is based on a long-term macroeconomic view, not short-term anomalies. We consider many variables when constructing portfolios including, but not limited to, expectation for: inflation, deflation, corporate earnings, geopolitical concerns, interest rates and currency valuations. We seek to exploit proven long-term relationships among asset classes when constructing portfolios. We do not time markets in the short term.
We believe the market is efficient in the long term but at times can prove to be irrational or mispriced. This mispricing usually occurs during periods of extreme optimism and pessimism. We believe it is extremely important to monitor the investor psychology surrounding individual stocks and sectors of the market. We tend to move our portfolios six months ahead of a peak or trough in a stock or sector of the market. Following and anticipating market psychology goes hand in hand with the asset allocation decision process.
Controlling Cost/Passive Management
We believe the cost to invest is critical in portfolio construction. Portfolios are constructed to represent the asset classes and markets we target at the least expensive cost. Many of the stock asset classes are represented by indexes for several reasons: 1) Indexes provide effective representation of asset classes and markets. 2.) Indexes are offered in the marketplace at very low costs. 3.) Indexes can be very tax-efficient.
We pay particular attention to managing risk in portfolios. Decisions to add new asset classes are based on how they impact the overall portfolio’s expected return, volatility and downside risk.
Impact of Taxes
We construct portfolios to minimize the impact of taxes by considering the differences between types of accounts that a client may hold: taxable, tax-deferred retirement vehicle, tax advantaged charitable trusts, grantor trusts, generation skipping trusts and foundations. The location of assets within the different accounts may have differing tax considerations and therefore, could make a significant difference in long-term wealth accumulation. In addition, we aggressively take tax losses, where appropriate, and consider alternative minimum tax in our investment decision-making.
Individual Designed Portfolios
We construct a portfolio unique to your individual needs, rather than mold your needs to a predetermined model portfolio. Your tolerance for risk, as well as your need for returns, is conscientiously considered in our design. Ongoing management takes into account the client’s specific cash flows and taxation issues. This is spelled out in a detailed Investment Policy Statement unique to each client.