We say this often at the firm to ourselves and our clients. But how do we really invest our client’s money?
On any given day, we are involved in investing new money being added to accounts, changing a portfolio’s risk appetite due to life changes, moving into environmentally and socially-aware investment strategies to better align with a client’s values, and introducing private fund exposure through private equity and alternative finance offerings – and that’s just scratching the surface.
Much like a well-designed home starts with a solid foundation, our Silicon Hills Investment Marketplace – where we strive to create exceptionally personalized client portfolios – starts with a solid investment methodology that is grounded in rational investment engineering and expert curation.
With more exchange traded funds available globally1 now than the approximate 3,600 U.S. publicly listed companies, the investment universe is really something. So how does our firm narrow the scope to provide our clients with investment portfolios that suit the needs of their financial plan? We call it “core-satellite” portfolio construction and this approach serves both the public and private markets.
In the public markets, our investment committee looks at the major asset classes, the periodic table for investing, and decides how much weight to distribute to each opportunity. The “core” of the portfolio includes:
- domestic equities with sub-classes identified by size and style (i.e. small cap growth);
- international equities with sub-classes often defined by global regions and emerging markets; and
- fixed income defined by style of bonds and duration.
The “satellites” fill out the portfolio with our best ideas on an industry sector, world region, or bond instrument that seeks to outperform based on market conditions.
In the private markets, we bring forward the same core-satellite discipline, but express the approach in a slightly different manner.
Some clients prefer to stay entirely within our public marketplace offering; however, for those that want exposure to private funds, we guide clients through a detailed process to determine an allocation weighting (percent of overall investable assets) that makes most sense within the confines of their wealth plan. We then work together to develop a diversified private portfolio that utilizes a new private equity fund as the “core” and add “satellite” funds based on several factors.
Private funds are complex and designed to be a longer-term investment strategy. They often involve a capital call structure, creating an investment cascading effect where 20-30% of an overall commitment will be “called” and contributed each year. For illustration, a client with a $500,000 private markets capacity may make a capital commitment of $100,000 in year one but will only contribute $30,000 in real dollars based on the underlying call structure. Due to the longer-term nature of these investments, our approach provides access to our best ideas as they evolve over a rolling five-year period.
At Silicon Hills Wealth Management, we are driven to inspire you to be invested – through expertly and thoughtfully designed investment portfolios exceptionally personalized to suit your needs.
1 ETFGI, an industry research firm reported over 5,400 global ETFs at the end of November 2017
Disclaimer: Any investment strategy involves risk, including the possible loss of principal invested. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from an investment professional. No part of Silicon Hills’ online content is intended to serve as a recommendation or testimonial for any investment product, service, or strategy. Additionally, the information posted is not to be construed as solicitation to offer or sell any security. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult the professional advisor of your choosing.