Balanced Account Management
At Martin & Company, we believe that asset allocation decisions ultimately make the most difference in the risk/return level of an investment program. Therefore, we place great emphasis on this important aspect in our balanced account investment management strategy. At the beginning of each balanced client relationship, an asset allocation plan is developed as an integral part of the client’s investment goals and objectives. The asset allocation plan is designed to provide each client with an efficient combination of stocks, bonds, and cash equivalents with a goal of meeting the return requirements of the client over the long term within an acceptable level of risk. The Martin & Company Large-cap Equity Strategy, Small-cap Equity Strategy, and Fixed Income Strategy as well as international exchange traded funds are utilized to provide exposure to key asset classes. A client’s asset allocation is reviewed annually and at any time a material change in client investment objectives occurs.
Large-Cap Equity Management
The Martin & Company Large-Cap Equity Strategy is designed to provide capital appreciation potential to those portfolios willing to accept an element of volatility that is normally greater than that of fixed income securities. The strategy is designed to serve as a core equity portfolio for clients, consisting of both growth and value components. Large-cap equity portfolios are comprised primarily of large capitalization companies, consistent with the universe of the S&P 500. Portfolios are complimented with exchange traded funds and select mid-cap equity securities. Select mid-caps are evaluated based upon a fundamental analysis of the underlying business and a company’s financial statements.
Small-Cap Equity Management
The Martin & Company Small-Cap Equity Strategy applies a bottom-up, value investing strategy with a goal to provide above average returns. We believe focusing on the merits of each individual investment opportunity will be critical in achieving our goal. Businesses that meet our criteria for factors such as cash flow generation and balance sheet quality are selected as potential investments. When the equity securities of these businesses are offered in the market at prices that we believe will lead to excess returns if purchased, they are added to managed accounts. By maintaining a fundamental focus on the quality of a company’s business and this strong price discipline, we believe our process will add value to client portfolios over a time horizon of five years or longer. Historically, small-cap securities have experienced greater volatility than large-cap equities and fixed income securities. The Small-Cap Equity Strategy typically owns 30-35 securities. With a universe largely consistent with the Russell 2000, market capitalization of companies range from approximately $100 million to $5 billion. While the number of securities creates some level of diversification, we do not restrict investing decisions based upon sectors weights. At the time of purchase, our maximum issue size is 5% of the small-cap portfolio.
Fixed Income Management
At Martin & Company, we believe the role of fixed income investments is to provide consistently high income with less volatility than equities. Our study of fixed income management styles has shown that the intermediate maturity sector of the bond market provides returns virtually equal to longer maturities over a market cycle with far less volatility in results. With the pattern of returns available from this area of the yield curve, maturities are limited to ten years or less under virtually all market conditions. Although our fixed income portfolios will comply with any client defined quality constraints, individual issues are limited to investment grade bonds (no junk bonds); and average portfolio quality is normally AA or better. Issues are selected to fit the specific maturity and sector needs of the portfolio structure. Within these requirements, the best relative values are sought with careful attention given to adequate diversification by issuer. Call protection is eagerly sought and issues must be particularly rewarding to accept call provisions favorable to the issuer.