INVESTMENT STRATEGIES
WCB’s commitment to actively managed customized portfolios has been in place for over twenty years whereby the firm has managed fixed income and equity portfolios based on disciplined investment strategies that have proven the test of time and often tumultuous market conditions. While both the fixed income and equity strategies are disciplined, they are also sufficiently flexible to permit our investment teams to employ opportunistic management and trading tactics. These strategies are based on detailed quantitative and qualitative analysis of each publicly traded company that is an investment candidate, technical considerations, a strong “sell discipline”, economic fundamentals, foreign and domestic influences, rapidly changing market conditions, and long term global demographics.
The quality of the firm’s internal proprietary research, along with selective research from various independent external sources around the world, and the employment of risk management techniques, have been key variables in the production of long term investment results that have been very pleasing to clients. In addition, this has resulted in several long-term client relationships that date back to the inception of the firm in 1984 and the management of multiple portfolios for 7 clients.
Fixed Income Management
WCB’s primary goal in managing fixed income portfolios for investors is to achieve or exceed investment and client service expectations. The distinguishing characteristic the firm has used to do this involves the initial construction and on-going active management of customized portfolios that comply with client guidelines as opposed to managing accounts based on some type of predetermined master portfolio, approved list, or commingled fund. Instead, portfolios are managed based on specific client directives in order to meet particular requirements for liquidity, risk tolerance, credit quality and a host of other variables. In addition, at WCB our professional staff make a special effort to know each client and understand their needs.
The principal objective in fixed income management at WCB is to preserve and enhance the purchasing power of the assets. The process is driven by the philosophy that the firm must protect the clients' capital and make it grow at a rate that exceeds the rate of inflation and an applicable benchmark while staying within the stated guidelines. The approach is a blend of top-down and sector/security-specific analysis. It is thorough and balanced, utilizing elements from fundamental, quantitative and technical analysis in order to maximize returns within a client-specified duration band while minimizing market, sector and credit risk. All portfolios are managed according to a disciplined investment strategy that employs three primary steps (Yield Enhancement, Valuation Analysis, and Maturity and Risk Management) to tactically position portfolios relative to the yield curve and to overweight selected market sectors such as high quality corporate bonds, mortgage backed securities, assets backed notes and, if client directed, to a much lesser degree private placements (144-A’s) and high yield debt.
Treasury Inflation Protected Securities (“TIPS”) Management
WCB’S primary goal in managing TIPS portfolios is to provide clients with superior investment results when inflation is rising. Such portfolios generally have a low correlation with not only traditional bonds but also stocks while offering liquidity not found in traditional inflation hedges. At WCB, we construct and manage a customized portfolio of TIPS for each client based on their investment guidelines, etc.
Our company has been active in the management of TIPS since July 1, 2001 (after having studied the nature of these securities since they were introduced by the U.S. Treasury in 1997) as a means to protect investors from the effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the principal is adjusted to reflect the effects of inflation. A fixed interest rate is paid semi-annually on the adjusted amount. At maturity, if inflation has increased the value of the principal, the investor receives the higher value. If deflation has decreased the value, the investor receives the original face amount.
These U.S. government-guaranteed instruments are particularly beneficial to institutions that require a high overall quality while seeking broader portfolio diversification among their longer duration financial assets than is provided by other fixed income securities and stocks, both of which are impacted by inflation. TIPS are also an attractive tool for investors seeking potentially higher returns on their government-guaranteed fixed income portfolios during periods of historically low yields. The addition of TIPS to a standard fixed income asset allocation of governments, corporates, and mortgages can simultaneously result in reduced volatility risk and increased returns. TIPS provide a low correlation with not only traditional bonds but also stocks while offering liquidity not found in traditional inflation hedges.
Equity Management
WCB’s goal is to achieve or exceed expectations by employing a unique methodology combining both quantitative and qualitative techniques to construct customized equity portfolios to meet specific client needs. Over the years, the firm has distinguished itself primarily in the management of three equity products or strategies: “Large Cap Growth”, “Large Cap Core", and “Mid-Cap Growth”.
The construction of each equity portfolio begins with a broad filtering process based on, of all things, a school of philosophy known as Mathematical Value Theory (“MVT”), [“The Structure of Value” by Robert S. Hartman, (copyright by Southern Illinois University Press, 1967), Feffer and Simons, Inc, London and Amsterdam]. MVT is a scientific framework used to identify value or “goodness” mathematically rather than subjectively, thereby enabling one to discriminate among a group of similar objects or entities (such as publicly traded companies), based on their inherent value. Through the proprietary analysis of 27 financial ratios from the balance sheet and income statements of a universe of companies, the MVT methodology enables WCB to identify a sub-set of companies that are, on average, superior to the parent universe of companies from which they were chosen (such as the companies that constitute the S & P 500 stock index).
The companies in the selected universe (which is often an index) are ranked from best to worst. The equity portfolio management team then employs qualitative skills, tools, and proprietary trading techniques to construct a stock portfolio for each client based on the index or population of stocks (customized benchmark) selected by the client. Stocks representing ownership in these superior companies are chosen and given equal weighting in each portfolio, held for one quarter and then rebalanced as new financial information becomes available. This process is repeated 30 days after the end of each calendar quarter in order to capture additional quarterly data as financial information is made public.