Investment Policy Formulation:

Based on discussions with your Investment Committee , and historical risk and return characteristics of the allowable investments, we develop a proposed Investment Policy Statement, setting targets and allowable ranges for each asset class, sub class and investment style.  That statement is distributed to each member of the Board prior to the next meeting.  We revise the proposed Investment Policy Statement based on the input of the Board.  A final version of the Investment Policy Statement is drafted and distributed to the Board for final approval and signatures of each of the Board members.  The final version of the policy will include specific discussion regarding risk management policies and investment guidelines.  The guidelines will be reviewed at each meeting.

Asset Allocation

Research shows that the majority of investment return comes from correct asset allocation.  As such, asset allocation recommendations are one of the most important roles of the consultant. 

Our portfolio construction and modeling process includes both historical and forward-looking forecasting.  An appropriate asset allocation framework is the starting point for both achieving your objectives and capital preservation.

The first step in our process is to assess the cash flow needs of your plan.  This evaluation includes the evaluation of the actuarial report to gauge the upcoming cash needs of the plan for the near and intermediate term.  This evaluation factors into the process of defining the risk parameters and future asset classes.

The next step involves defining key variables for acceptable asset classes and their return and risk assumptions.  Our process includes all of the major asset classes, sub-classes and investment styles, utilizing historical risk and return observations as the expected long-term risk and return.  For any asset class where the historical observations may not be a true reflection of the risk and return characteristics, like real estate and private equity (because of lack of daily pricing, liquidity issues, appraisal issues etc.), we will make adjustments to the historical observations based on our knowledge, experience and future expectations. 

With the historical analysis serving as the foundation of our modeling, we then apply our forward-looking risk/return expectations for the asset classes.  Our open-architecture process also allows for inclusion of new or emerging asset classes by the creation of assumptions for risk and return. 

We are confident our method is both prudent and appropriate because it is guided by concrete data from historical values of risk and return of traditional asset classes while also allowing for the ability to adapt and use an open framework based on external factors. 

One of our Senior Consultants, Wally Wilson, is an Actuary and has had considerable experience with asset/liability modeling.  We would work with your actuary to develop an appropriate asset/liability study and assist in the following:

§         Setting study objectives

§         Establishing appropriate liability and investment related assumption
§         Determining key study variables

§         Interpreting results