Markets continued their upward climb during the first quarter of 2017 even as political risks intensified both here and abroad. From the US Presidential election to the end of March, the S&P 500 appreciated more than 11% despite the emergence of potential impediments including a more vigilant Federal Reserve, missteps by the new administration and continued nationalistic fervor globally. Is the resilience of the markets justified or are investors ignoring impending problems at their peril?
The overriding tenet of our philosophy is to preserve capital and enhance its purchasing power. Our global private clients come to us with significant wealth, (sometimes with stocks that have low tax basis and/or are highly concentrated), usually earned by them or their forbearers by taking great risk. They turn to us for stability in their investments and to steward these assets across generations. We honor that trust by crafting investment programs that seek to protect capital while meeting long-term investment objectives. Our goal is to achieve an enhanced return net of fees, annualized over market cycles.
In crafting investment consulting and wealth management solutions for our clients we utilize a four-phase process:
2. Plan Development and Optimization
3. Plan Implementation
4. Customized Reporting
We begin by developing, analyzing and discussing a picture of the client's intergenerational wealth plan, tax situation, global situs and current asset allocation. We fully integrate a specific investment strategy into our clients' wealth and tax planning. We eschew formulistic questionnaires in favor of iterative dialog that is substantive and client-specific; thus our understanding of client objectives and their own definition of risk is broad-based and nuanced. Our document and portfolio review often uncovers unintended risks as well as significant variances between what the client believes to exist versus what really exists. By reviewing the portfolio against the wealth plan, we can more readily assess the likelihood that the client's goals will be achieved. The result is a clear snapshot of the wealth plan and current array of assets.
We work with the family and its advisors to develop an investment plan that optimizes wealth in light of the client's specific objectives and constraints. Just as goals can be multiple and complex, restrictions are typically varied and include document and situs issues, tax considerations and client biases and/or experiences. Asset allocaton is driven not only by our market view but also by client particulars and the nature of the entities we are managing. We consider these specifics in light of our assumptions regarding the expected return, volatility, and correlations of various asset classes. We then simulate ending wealth values, including the client's projected cash flows. The result is a powerful means of minimizing the possibility of failure while enhancing the likelihood of goal attainment. We deliver to each client a set of guidelines that provide structure, discipline and accountability to the investment program while allowing for some degree of flexibility.
While we are style-neutral over a market cycle, we tactically over- or underweight portfolios when we believe a sizeable investment opportunity exists that is likely to continue for some time. Current and prospective managers undergo a rigorous quantitative review including proprietary screening, analysis of sample portfolios and return patterns in various environments. Importantly, the metrics we use to assess managers are not uniform across styles and sectors. The quantitative review is helpful in identifying prospective managers and tracking the progress of those selected, but it is only the beginning. It is a truism that performance numbers are old news and not likely to be repeated. We strive to use our experience and in-the-know information to ferret out those managers whose past success we believe is more likely to be repeated. We are particularly interested in the competitive edge that each manager has and how that edge may be further honed or blunted. We have a history of replacing managers about whom we have concerns even when their performance continues to be impressive.
Our clients expect and deserve to understand the progress of their investment program. We believe in accountability and know that effective self-analysis is essential to ensure a positive dialog with our clients and to provide a basis for considering change. Attribution reporting can uncover the successes and/or the shortcomings of an investment program. In concert with our clients we create a series of blended benchmarks to isolate and capture the impact of our asset allocation, style and sector weightings, and manager selection. Beyond performance reporting, we can provide a high degree of analytics on the total portfolio as well as the individual managers to whom we have awarded mandates. Additionally, we can include transaction, cash flow and tax-related information in a format customized to client specification. The report serves as a feedback loop that informs the entire wealth management process.
RALPH D. SINSHEIMER
Co-founder, The Solaris Group; oversees Solaris Advisors, including strategic asset allocation, manager selection and philanthropic services.
Formerly Senior Vice-President and Head of Wealth Management for Neuberger Berman Trust Company; Managing Director at OFFITBANK; General Partner of Eureka Capital Management, a long/short equity hedge fund; and Vice President and Director of Funds at Loomis, Sayles & Company.
"Asset allocation performed without regard for the unique circumstances of the client is suspect. Likewise, so-called optimization tools that rely slavishly on the past cannot uncover catalysts of change. We strive to be forward-looking and to keep in front of significant events for the benefit of our clients."
The Solaris Group LLC
The Solaris Advisors LLC
645 Madison Avenue, 8th Floor
New York, NY 10022
Tel: (212) 582-4500
Fax: (646) 219-6638
Solaris Asset Management LLC
2 Depot Plaza, 4th Floor
Bedford Hills, NY 10507
Tel: (914) 241-2222
Fax: (914) 241-8106