Investment Strategies
Our wide variety of active managers comprise to make a suite of powerful investment opportunities
We Diversify Our Portfolios Among Multiple Money Managers
An element of an intelligent asset allocation plan is utilizing different money managers within a portfolio. Each manager should have different risk profiles, without overlap, and utilize diverse methods to capture market gains. When choosing money managers we search for proven, long term strategies of success. Each manager must show historically low volatility, low drawdowns, and superior performance against their benchmark.
Portfolio Allocations
Unlike a traditional portfolio that looks primarily at the mix between equity or bond investments, we instead group our tactical and dynamic managers into different categories, each with it's own strategy and risk style.
Tactical Equity
The use of Tactical Equity strategies has been used successfully by large institutions to provide growth while avoiding catastrophic losses.. the best of both worlds.
Obviously stocks can provide tremendous growth opportunities. Unfortunately they also can have periods of severe decline, and periods such as 2000 and 2008 have caused investors the most pain. Many investors have completely shied away from using equities within a portfolio simply for fear of losing significant portions of their wealth. For growth opportunities and with the goal of staying ahead of inflation, some allocation to equities is often necessary.
By using various indicators that will identify bearish conditions, managers will move to cash, treasuries, or other defensive positions in times of market declines with the goal of protecting capital during these periods. By avoiding large declines in bear markets, a portfolio has a much better chance of rebounding, while incurring large losses can take many years to recover, and can be completely devastating to an investment portfolio and an overall retirement plan.
We have identified managers in all sectors of the equity markets such as large cap value, large cap growth, mid cap, small cap, and international that have the ability to play defense in declining markets, while capturing solid gains in bullish conditions.
Dynamic Balanced
The use of a balanced portfolio of stocks and bonds has been around for years and has been useful within portfolios for reducing risk. Unfortunately the vast majority of balanced mutual funds or ETF’s are static in nature and will always maintain the same percentage of equity and bond allocations.
There are times when bond markets can be riskier than equities, and of course periods when equities are in bear markets. The problem with having static positions, whether it is in stocks or bonds, losses are virtually guaranteed in down markets.
By using a Dynamic Balanced strategy within a balanced portfolio, managers have the ability to move more into equities in bull markets, and shift to bonds, commodities and cash in bear markets to preserve capital.
Alternative Investments
Alternative Investments have a low correlation to the stock and bond markets and can add additional protection during bear markets. In normal market conditions they can also provide additional opportunities to capture returns.
Tactical Real Estate
Most investors have used real estate investment trusts, to capture this part of the market. Individual REITS can have their own set of difficulties, which include market devaluation, illiquidity and in some cases complete default. Also depending upon the REIT, there can also be losses due to interest rate increases similar to a bond portfolio.
We have identified strategies that use ETF’s and real estate mutual funds to capture growth opportunities without the risk of holding individual REITs. By tactically managing the holdings, greater returns can be achieved while also providing protection to avoid significant losses.
Alternative Investment Strategies
There are various alternative investment strategies that have been used successfully by large institutions and hedge funds that are very sophisticated and are seldom used by retail investors. Trading Long/Short within various markets to capture returns in either direction is a common strategy. Buying and selling stocks within one asset class, commonly known as Market Neutral is another. Managed Futures, or the buying and selling of commodity futures, has been used successfully, and writing or selling calls against existing positions, known as Buy Write, is an additional investment strategy.
To find the best in class, West Coast Capital Management only uses firms with strategies that have a proven track record of success.
Dynamic Bond
This style of management will move across many types of bonds, including short and long term government bonds, non-US developed bonds, high yield, investment grade corporate, municipal, emerging markets,mortgage backed bonds, as well as cash.
This allows the managers to take advantage of opportunities in each type of bond class rather than just staying in one type of bond, which the majority of bond portfolios will do. This type of management helps to reduce bond risk in times of bearish periods, as well as identifying bullish sectors within the bond markets to increase returns.
Tactical High Yield
High yield bonds have provided excellent returns over time, as the bonds of lower rated companies generally pay higher rates of interest, and the underlying value of high yield bonds will fluctuate much more than a typical investment grade bond. This higher fluctuation affords opportunities for managers to employ strategies of buying and selling high yield bond positions to capture solid gains while also mitigating losses in bearish periods.
Dynamic Multi-Asset
As we move up the risk scale, it is important to continue to identify areas of the market that are often overlooked by investors, which can continue to add diversification as well as increased returns.
This type of dynamic strategy will move across additional asset classes rather than only different bond allocations. It will include finding opportunities in bank loans, convertibles, master limited partnerships, mortgage REITS, preferred stocks as well as dividend stocks. Usually this strategy will never allow more than a certain percentage to just one asset class, and will move across all sectors to find opportunities for growth as well as finding safe havens in bearish markets.