There’s no single concept is right for every investor – at TrueNorth, our team works with you to develop a strategy that aligns with your objectives and risk profile. Our guiding principles are based upon our core beliefs regarding asset allocation, risk management and securities selection:
Asset allocation is a key component of our portfolio management decisions. Unlike many other wealth managers, it is an ongoing process at TrueNorth. It begins with determining your strategic asset allocation – this simply means the long-term target for how your assets are divided between stocks, bonds and cash. Your strategic allocation is based upon your risk profile and long-term return objectives. It indicates how your investments would typically be allocated in what we would consider “normal” or neutral market conditions.
Tactical asset allocation is ongoing, and refers to adjustments we may make to your strategic asset allocation based upon our economic and market outlook. For example, if we think the markets pose excessive risks, we may make a tactical adjustment to your allocation to reduce market exposure and increase cash. We may also hold a limited amount of bonds in equity portfolios or stocks within fixed income portfolios, in an effort to reduce risk or enhance returns.
Managing risk is integral to wealth creation and preservation. Our recommendations with respect to overall investment strategy and strategic asset allocation are based upon each client’s individual circumstances. This means that our approach for clients with sufficient lifetime wealth will differ from strategies for those who need their nest egg to grow for the future. It also means transitioning your portfolio to a different strategy as your needs change over time.
We select asset classes from the top down, then pick stocks from the bottom up. Top down asset class selection involves analyzing the "big picture". We form our outlook for the economy and individual economic sectors, and then use our economic forecast to pick the industries we believe represent the best opportunities for growth and out-performance. Bottom up stock selection is driven by in-depth analysis of investment candidates within those favored industries.
Both qualitative and quantitative securities analysis are used in our securities selection process. (Quantitative analysis focuses on mathematical and statistical research such as the debt-to-equity and price-to-equity ratios. Qualitative analysis uses subjective judgment to evaluate information such as management expertise, industry cycles, labor relations, and other factors not generally identified through quantitative analysis.) Our securities selection process incorporates independent and sell-side research with our own internal analysis. Resources include independent economic, market, sector, and individual securities analysis, and research subscription services that provide a wide range of sell-side analysis of market sectors and individual securities.
Our goal with respect to fixed income securities selection is to develop a portfolio that seeks to optimize income, manage downside risk, and provide some potential for portfolio appreciation.