Investment Management Approach
We strive for an above-average investment return without assuming undue risk through careful security selection and portfolio diversification. To accomplish this goal we foster an environment for success through a dedicated staff, professional portfolio management and personalized client service.
We believe that risk is controllable and necessary. It can be estimated, analyzed and managed to meet your specific needs. We strike a balance between risk control and innovative portfolio management techniques that enables us to provide consistent investment results yielding ongoing client satisfaction.
Typically our investment objectives include:
Preservation of value and safety of principal
Maintenance of sufficient liquidity to meet clients' needs
Provision of prudent diversification of investments
Maximization of the rate of return on investment while abiding to the confines of prudence and safety
Our Trust Investment Officers continuously monitor economic and market conditions as they relate to portfolio holdings.
Our internal committees periodically monitor portfolios to ensure that the investments meet established standards:
Fixed Income Style and Strategies
Compliance with governing documents
Asset allocation’s relationship to stated objectives
Soundness and suitability of individual investments
Execution of various portfolio strategies
Our style is to seek maximum current income and price appreciation that is consistent with the preservation of capital and prudent risk taking. Several types of fixed income securities are utilized to add value while maintaining an overall risk level similar to the plan's guidelines and designated indices.
In an ideal situation, bond maturities would be "laddered" so that assets would be distributed evenly over a specific range of time, but because of our ever-changing interest rate environment, it is important that maturity structuring be actively managed.
Yield Curve Considerations
When buying securities, special consideration will be given to the shape of the yield curve (a graphic depiction of interest rates across all maturities). As the yield curve changes, we target value-buying opportunities to enhance the portfolio’s return.
Bond yield is often measured and evaluated by its value compared to corresponding United States Treasury Securities. This comparison, known as its spread, is used to identify relative values in the bond market. As the bond markets change, often a particular sector may offer a favorable spread. It is advantageous to consider these spreads and look for values when buying bonds.
Current market values and yield to maturities are also examined to identify potential opportunities for bond swaps. We use yield analysis and bond swap applications to help identify opportunities to capture market appreciation.C
All holdings are subject to thorough investigation of credit quality through published outside rating services, which include Standard & Poor's (S&P), Fitch and Moody's. Bond ratings are monitored and our internal committees review a “Watch List” of potentially troubled bonds monthly.
Cost Efficient Trading
All of our bonds are bought and sold through institutional brokers, who offer attractive prices compared to retail brokers. To maximize our purchasing power, we group the bond needs of our individual accounts and submit to these brokers "request for offers or bids" on large blocks of bonds. This competitive bidding and offering process helps us maximize our purchasing power, which also contributes to the total return of the account.
Equity Style and Strategies
We strive to maximize total return and minimize volatility in our equity portfolios by focusing on high quality, industry leading companies with management teams that have a demonstrated history of increasing shareholder value. We use micro and macro methodology, as described below, to select, populate and adjust securities in our equity portfolios.
Bottom-Up Analysis (Micro)
We choose stocks by conducting a fundamental analysis of historical company financial performance. We favor companies that have demonstrated steady growth in annual sales, have high and improved levels of profitability and possess a healthy and improved financial position. We prefer companies with a competitive and sustainable business advantage and we like to buy them at a reasonable price.
Top-Down Analysis (Macro)
We study and analyze current and projected economic conditions and predict their impact on the various sectors of the S&P 500. Sectors are then over-weighted, under-weighted or equal weighted based on our assessment.
Individual security allocation is determined by the results of our top-down and bottom-up analysis. As market conditions change and sector weightings are adjusted, portfolios are rebalanced to reflect the current sentiment. Stocks that have deteriorated fundamentally are liquidated and new stocks with compelling fundamentals are allocated. Market values are reduced in stocks that have experienced significant capital appreciation.
Our Tapestry portfolios are comprised of no-load mutual funds selected to assist clients in reaching their long-term financial goals. Strategically diversifying investments across major asset classes (stocks, bonds, and cash) to pursue maximum return for a given level of risk is called “asset allocation.” Asset allocation is the investment concept that is the cornerstone of Tapestry portfolios.
There are three major classes of investment securities: stocks, bonds, and money markets. Each of these classes offer varying returns and levels of risk. Within the major asset classes there are many different categories including but not limited to long-term bonds, short-term notes, value stocks, growth stocks, large capitalization stocks, small capitalizations stocks and others. These sectors also have certain investment features that cause volatility (risk) in their returns. Some of these securities have more volatility than other securities. By diversifying among the investment asset classes and sectors and selecting the appropriate mix of assets for each client, risk can be reduced and returns enhanced.
Our selection process involves the evaluation of no-load mutual fund performance, fees and expenses, risk and return profile, management tenure, fund longevity, investment style, total assets, portfolio composition, and sector weightings. From this data, we select the best-managed mutual funds to enhance your investment return. Our internal committees review mutual fund performance monthly and mutual fund changes may be made when economic and market conditions warrant.
We offer six models ranging from a capital preservation portfolio comprised of money market and fixed income securities to the most aggressive growth portfolio with 95% equities. The models are rebalanced on a quarterly basis to ensure the proper asset allocation is maintained.
We want you to know that investment products provided by Trust Services of First Financial Bank:
• Are not a deposit
• Are not FDIC insured
• Are not insured by any federal government agency or the bank
• May lose value