Precision Portfolios for Today’s Market Challenges
Today’s investment environment is unlike any that’s come before it. Marked by lurking volatility, economic uncertainty and an ever-expanding universe of investment vehicles, it’s an era that requires a far more deliberate and detail-driven approach to investing.
That’s why so many financial professionals are turning to Hanlon Investment Management. We design comprehensive, multi-asset class, multi-strategy portfolios with a goal of ensuring your clients are well-compensated for whatever amount of risk they choose to take, applying a proprietary, research-intensive process you won’t find anywhere else.
Our Unique Research Technique Follows This Five Step Process:
Assess the Capital Markets
Sound investment management starts with well-founded convictions about the domestic and international economic outlook, which in turn help establish expectations for the risks, returns and correlations associated with the broad universe of asset classes.
Some firms rely on their own internal financial analysts. Others tap outside experts. At Hanlon, we do both, studying the research and views of many leading firms to establish a consensus view, which we then adjust according to our own internal research forecasts. The result: Your clients benefit from the best thinking found both inside and outside of our firm.
Determine the Optimal Combination of Asset Classes
For too many institutions, the quest for the efficient frontier ends with a simple 60/40 mix of stocks and bonds. At Hanlon, we look to a far deeper assortment of asset classes, including real estate, tactical and alternative investments.
Next, we determine the weights that should be assigned to those asset classes for a variety of investment objectives, with a goal of achieving the greatest reward for a given level of risk, factoring in the correlation of different asset classes.
We start by using Mean-Variance Optimization, but we improve on it with a Black-Litterman approach that incorporates our comprehensive capital markets assessment and minimizes over-concentration in smaller asset classes. Finally, we infuse tactical and alternative holdings to provide additional downside risk protection for certain investment models.
Identify and Engage the Best Managers
Even the most brilliant asset allocation approach is only as strong as its execution through the selection of specific investments—it’s essential that those investments are highly correlated to the benchmark indices used in the asset allocation process.
We employ a proprietary scoring methodology that ranks the universe of available investments on performance, cost, tracking error and liquidity. Those qualities lead us to favor ETFs, however we do use a handful of rigorously-vetted active managers for certain alternative investments.
Construct the Portfolio
Construction of each portfolio involves final tailoring with an eye on:
Costs. Before finalizing a model, we consider position sizes, and may eliminate those with very small proportions—say, under 2 percent—to reduce ongoing transaction costs.
Tax Efficiency. Consistent with the client’s tax planning needs, we substitute more tax-efficient assets where appropriate.
Monitor and Periodically Rebalance
Because the markets and the world’s economies never stop changing, your clients can’t afford a “set it and forget it” mindset.
That’s why we regularly update our capital market assessment, portfolio optimization and manager selections, and rebalance portfolios semi-annually. And with an appreciation of the real-world impact of taxes on total return, we also look to actively manage each portfolio’s tax impact through tax loss harvesting and the use of new cash to restore portfolios to their target allocations.