The Efficient Portfolio
...efficiency
through design
The proper investment portfolio design includes two distinct processes: asset allocation and management selection.
Analyze current position
1. Review current investment policy statement, if available.
2. Review portfolio cash flow requirements
3. Analyze current investment activities & holdings
Design optimal portfolio
1. Assess client/plan risk tolerance
2. Assess client/plan need to assume risk based upon goals
3. Propose optimal asset allocation based upon modern portfolio theory.
Formalize investment policy
1. Prepare a written Investment Policy Statement including:
a. Investment objectives
b. Investment guidelines
c. Procedures for selecting managers or mutual funds
d. Monitoring and benchmark guidelines
Implement policy
1. Prepare written recommendations selecting specific managers or mutual
funds and the amount of dollars to be allocated to each
2. Determine if a dollar cost averaging strategy will be used
3. Negotiate fees and commissions with managers and custodians
Monitor & supervise
1. Provide ongoing supervision of investment program
2. Provide a monthly account appraisal of holdings and transactions
3. Prepare quarterly reports evaluating the performance of the portfolio
and individual managers/funds versus the appropriate benchmarks
Rebalance
Asset
Allocation
...objectives
realized
The Asset Allocation process, essential in
establishing the optimal balance between return and risk, analyzes
your entire portfolio in order to:
• Assess risk tolerance
• Evaluate time horizon
• Project cash flow needs
Management Selection
No load mutual funds provide benefits including diversification and access
to top professional talent.
Utilizing the services offered by separate account management provides access
to top investment talent, tax efficiency, fee reductions as the account size
grows, and performance boosting potential for small portfolios.
The Redwood management screening process provides access to the “best
of the best” management talent using the following criteria:
• Manager Tenure
• Performance over time relative to peer
• Risk over time relative to peers emphasizing downside risk
• Efficient operations evidenced by lower expenses
relative to peer by utilizing institutional funds.
Additional benefits to Redwood selected no load mutual funds include access
to closed funds and negotiation power for lower costs and often lower minimums.