Balanced Strategy Overview
The Waterfront Balanced strategy seeks to opportunistically allocate between asset classes to provide a combination of capital appreciation
and current income. The blended portfolio of assets is diversified across sectors with security selection governed by a disciplined
emphasis on finding reasonably priced profitable companies with sound capital structures.
and current income. The blended portfolio of assets is diversified across sectors with security selection governed by a disciplined
emphasis on finding reasonably priced profitable companies with sound capital structures.
Strategy objective
The Waterfront Balanced Strategy seeks to provide a total return in excess of a 60/40 blended benchmark of equity (S&P 500)
and fixed income (Bloomberg Barclays U.S. Government / Credit Index).
and fixed income (Bloomberg Barclays U.S. Government / Credit Index).
strategy philosophy
The Waterfront Balanced Strategy seeks to opportunistically allocate between asset classes to provide a combination of capital appreciation and current income. The blended portfolio of assets is diversified across sectors with security selection governed by a disciplined emphasis on finding reasonably priced profitable companies with sound capital structures.
The equity sleeve is a concentrated portfolio with high active share focused on capital appreciation. The strategy in the equity sleeve is predicated on the belief that above-average profitability is an accurate measure of quality and that the market frequently underestimates its durability. We seek to exploit the opportunity by opportunistically investing in quality companies when they are attractively valued or out of favor.
The fixed income sleeve is focused on capital preservation and current income. The strategy is predicated on the belief that fixed income investing is asymmetric which requires a focus on compounding modest returns and avoiding credit mistakes that can impair capital. We seek to exploit the opportunity by emphasizing sound capital structures while opportunistically allocating to credit when volatility creates opportunity
The equity sleeve is a concentrated portfolio with high active share focused on capital appreciation. The strategy in the equity sleeve is predicated on the belief that above-average profitability is an accurate measure of quality and that the market frequently underestimates its durability. We seek to exploit the opportunity by opportunistically investing in quality companies when they are attractively valued or out of favor.
The fixed income sleeve is focused on capital preservation and current income. The strategy is predicated on the belief that fixed income investing is asymmetric which requires a focus on compounding modest returns and avoiding credit mistakes that can impair capital. We seek to exploit the opportunity by emphasizing sound capital structures while opportunistically allocating to credit when volatility creates opportunity
strategy process
Allocation:
The asset allocation is set using a two-year outlook and reviewed on a monthly basis using a proprietary quantitative model to
inform our opinion of the optimal allocation to equity, fixed income and cash.
Equity:
The equity sleeve screens for companies with high sector-relative profitability with a strong capital structure and stable or improving free cash flow generation. We seek to enhance our chances of identifying ‘winners’ in this universe of profitable companies by investigating the durability of their success. The fundamental drivers of above-average profitability are diverse and complex. We seek to isolate the idiosyncratic attributes of these companies and assess their ability to suspend the ceaseless pull of reversion to the mean. Examples of structural competitive advantages we identify are brand equity, proprietary technology, economies of scale, geographical density, capital intensity and network effects to name just a few. This universe of companies is sufficiently small and relatively stable allowing us to adequately vet and identify candidates with durable profitability.
We build a portfolio of 45-55 names from this universe of profitable companies with an active share in the range of 65-85% and a portfolio beta generally between 0.9x and 1.1x the S&P 500. While seemingly incontrovertible, investors affinity for quality is surprisingly fickle. Although our ability to anticipate the ebbs and flows of investor psychology is limited, we use relative valuation as a barometer of the market’s affinity for quality. In essence, we use valuation to discipline our quality bias. In practical terms, we seek to initiate new positions or add to existing ones in quality companies when they are inexpensive relative to their historical relationship to the market as a whole. Equally important, we seek to reduce or eliminate positions when their valuation relative to the market indicates they are most cherished.
Portfolio construction:
~The top 10 positions will represent 25-35% of the equity portfolio to allow security selection to drive alpha.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
~The fund will not have more than 2x the benchmark weight in any sector with an absolute maximum sector exposure of 35%.
~The fund will not invest more than 5% in any individual security unless either its benchmark weight exceeds that level or its active weight at that level is less than 100bps. In either of those two scenarios, the fund will not invest more than 100bps in excess of the benchmark weight.
Our emphasis on sector relative profitability sharpens our focus and narrows our investable universe to a successful and proven cohort of companies whose pedigree inspires confidence across economic cycles. Our emphasis on relative valuation helps us opportunistically invest in these companies, improving our odds of producing excess returns. Equally important, it disciplines us to reduce or divest positions when relative valuation suggests their inherent characteristics are fully appreciated by the market, which reduces our risk of outsized factor and style exposure.
Across economic cycles and irrespective of market moods, we seek to maintain an emphasis on finding high quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive relative outperformance over the next twelve months.
Fixed Income:
The fixed income sleeve utilizes a top-down framework to identify risk appropriate sector, credit and duration exposures. We then utilize a bottom-up fundamental research framework to identify issuers and securities that we believe have superior risk/reward for inclusion into the portfolio.
We review economic releases, material news and third-party research providers to assist in the process of monitoring the environment for risk assets. The portfolio is constructed based on our view of the macro environment, market liquidity and technical forces that can impact short and
medium-term performance.
The bottom up framework identifies issuers and securities that we believe have superior risk/reward for inclusion into the portfolio to achieve the top down criteria. Each company is reviewed from a fundamental basis to identify companies that have positive attributes such as deleveraging intent, sales/EBITDA growth and other factors as well as relative value.
At times, given market dynamics and liquidity constraints, the fund may invest in fixed income Exchange Traded Funds in order to
achieve diversified exposure to specific credit markets.
Portfolio Construction:
~A minimum of 70% of the portfolio will be invested in Investment-Grade-rated securities.
~The portfolio’s duration range will be 80-120% of the benchmark.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
Cash:
The funds cash position is a residual of the number of qualifying investments we can find and is normally between 0-3% of total fund assets. In times of uncertainty, cash is used to minimize downside capture; reduce daily NAV volatility; and to prepare to take advantage of opportunities created by declines in asset values.
The asset allocation is set using a two-year outlook and reviewed on a monthly basis using a proprietary quantitative model to
inform our opinion of the optimal allocation to equity, fixed income and cash.
Equity:
The equity sleeve screens for companies with high sector-relative profitability with a strong capital structure and stable or improving free cash flow generation. We seek to enhance our chances of identifying ‘winners’ in this universe of profitable companies by investigating the durability of their success. The fundamental drivers of above-average profitability are diverse and complex. We seek to isolate the idiosyncratic attributes of these companies and assess their ability to suspend the ceaseless pull of reversion to the mean. Examples of structural competitive advantages we identify are brand equity, proprietary technology, economies of scale, geographical density, capital intensity and network effects to name just a few. This universe of companies is sufficiently small and relatively stable allowing us to adequately vet and identify candidates with durable profitability.
We build a portfolio of 45-55 names from this universe of profitable companies with an active share in the range of 65-85% and a portfolio beta generally between 0.9x and 1.1x the S&P 500. While seemingly incontrovertible, investors affinity for quality is surprisingly fickle. Although our ability to anticipate the ebbs and flows of investor psychology is limited, we use relative valuation as a barometer of the market’s affinity for quality. In essence, we use valuation to discipline our quality bias. In practical terms, we seek to initiate new positions or add to existing ones in quality companies when they are inexpensive relative to their historical relationship to the market as a whole. Equally important, we seek to reduce or eliminate positions when their valuation relative to the market indicates they are most cherished.
Portfolio construction:
~The top 10 positions will represent 25-35% of the equity portfolio to allow security selection to drive alpha.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
~The fund will not have more than 2x the benchmark weight in any sector with an absolute maximum sector exposure of 35%.
~The fund will not invest more than 5% in any individual security unless either its benchmark weight exceeds that level or its active weight at that level is less than 100bps. In either of those two scenarios, the fund will not invest more than 100bps in excess of the benchmark weight.
Our emphasis on sector relative profitability sharpens our focus and narrows our investable universe to a successful and proven cohort of companies whose pedigree inspires confidence across economic cycles. Our emphasis on relative valuation helps us opportunistically invest in these companies, improving our odds of producing excess returns. Equally important, it disciplines us to reduce or divest positions when relative valuation suggests their inherent characteristics are fully appreciated by the market, which reduces our risk of outsized factor and style exposure.
Across economic cycles and irrespective of market moods, we seek to maintain an emphasis on finding high quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive relative outperformance over the next twelve months.
Fixed Income:
The fixed income sleeve utilizes a top-down framework to identify risk appropriate sector, credit and duration exposures. We then utilize a bottom-up fundamental research framework to identify issuers and securities that we believe have superior risk/reward for inclusion into the portfolio.
We review economic releases, material news and third-party research providers to assist in the process of monitoring the environment for risk assets. The portfolio is constructed based on our view of the macro environment, market liquidity and technical forces that can impact short and
medium-term performance.
The bottom up framework identifies issuers and securities that we believe have superior risk/reward for inclusion into the portfolio to achieve the top down criteria. Each company is reviewed from a fundamental basis to identify companies that have positive attributes such as deleveraging intent, sales/EBITDA growth and other factors as well as relative value.
At times, given market dynamics and liquidity constraints, the fund may invest in fixed income Exchange Traded Funds in order to
achieve diversified exposure to specific credit markets.
Portfolio Construction:
~A minimum of 70% of the portfolio will be invested in Investment-Grade-rated securities.
~The portfolio’s duration range will be 80-120% of the benchmark.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
Cash:
The funds cash position is a residual of the number of qualifying investments we can find and is normally between 0-3% of total fund assets. In times of uncertainty, cash is used to minimize downside capture; reduce daily NAV volatility; and to prepare to take advantage of opportunities created by declines in asset values.
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Equity Strategy Overview
The Waterfront Equity strategy is a concentrated portfolio focused on capital appreciation. The strategy is predicated on the belief that above-average profitability is an accurate measure of quality and that the market frequently underestimates its durability. The strategy seeks to invest in quality companies when they are attractively valued or out of favor.
Strategy objective
The Waterfront Equity Strategy seeks to provide a total return in excess of the S&P 500.
strategy philosophy
The Waterfront Equity Strategy is a concentrated portfolio with high active share focused on capital appreciation. The strategy in the equity sleeve is predicated on the belief that above-average profitability is an accurate measure of quality and that the market frequently underestimates its durability. We seek to exploit the opportunity by opportunistically investing in quality companies when they are attractively valued or out of favor.
The portfolio is diversified across sectors with security selection governed by a disciplined emphasis on finding reasonably priced
profitable companies with sound capital structures.
The portfolio is diversified across sectors with security selection governed by a disciplined emphasis on finding reasonably priced
profitable companies with sound capital structures.
strategy process
We screen the investable universe to identify companies with high sector-relative profitability with a strong capital structure and
stable or improving free cash flow generation. We seek to enhance our chances of identifying ‘winners’ in this universe of
profitable companies by investigating the durability of their success. The fundamental drivers of above-average profitability are diverse and
complex. We seek to isolate the idiosyncratic attributes of these companies and assess their ability to suspend the ceaseless pull of reversion
to the mean. Examples of structural competitive advantages we identify are brand equity, proprietary technology, economies of scale,
geographical density, capital intensity and network effects to name just a few. This universe of companies is sufficiently small and
relatively stable allowing us to adequately vet and identify candidates with durable profitability.
We build a portfolio of 45-50 names from this universe of profitable companies with an active share in the range of 65-85% and a
portfolio beta generally between 0.9x and 1.1x the S&P 500. While seemingly incontrovertible, investors affinity for quality is surprisingly fickle.
Although our ability to anticipate the ebbs and flows of investor psychology is limited, we use relative valuation as a barometer of the
market’s affinity for quality. In essence, we use valuation to discipline our quality bias. In practical terms, we seek to initiate new positions or
add to existing ones in quality companies when they are inexpensive relative to their historical relationship to the market as a whole.
Equally important, we seek to reduce or eliminate positions when their valuation relative to the market indicates they are most cherished.
Portfolio construction:
~The top 10 positions will represent 25-35% of the portfolio to allow security selection to drive alpha.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
~The fund will not have more than 2x the benchmark weight in any sector with an absolute maximum sector exposure of 35%.
~The fund will not invest more than 5% in any individual security unless either its benchmark weight exceeds that level
or its active weight at that level is less than 100bps. In either of those two scenarios, the fund will not invest more than
100bps in excess of the benchmark weight.
Our emphasis on sector relative profitability sharpens our focus and narrows our investable universe to a successful and proven cohort of companies whose pedigree inspires confidence across economic cycles. Our emphasis on relative valuation helps us opportunistically invest in these companies, improving our odds of producing excess returns. Equally important, it disciplines us to reduce or divest positions when relative valuation suggests their inherent characteristics are fully appreciated by the market, which reduces our risk of outsized factor and style exposure.
Across economic cycles and irrespective of market moods, we seek to maintain an emphasis on finding high quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive relative outperformance over the next twelve months.
Cash:
The funds cash position is a residual of the number of qualifying investments we can find and is normally between 0-3% of total fund assets. In times of uncertainty, cash is used to minimize downside capture; reduce daily NAV volatility; and to prepare to take advantage of opportunities created by declines in asset values.
stable or improving free cash flow generation. We seek to enhance our chances of identifying ‘winners’ in this universe of
profitable companies by investigating the durability of their success. The fundamental drivers of above-average profitability are diverse and
complex. We seek to isolate the idiosyncratic attributes of these companies and assess their ability to suspend the ceaseless pull of reversion
to the mean. Examples of structural competitive advantages we identify are brand equity, proprietary technology, economies of scale,
geographical density, capital intensity and network effects to name just a few. This universe of companies is sufficiently small and
relatively stable allowing us to adequately vet and identify candidates with durable profitability.
We build a portfolio of 45-50 names from this universe of profitable companies with an active share in the range of 65-85% and a
portfolio beta generally between 0.9x and 1.1x the S&P 500. While seemingly incontrovertible, investors affinity for quality is surprisingly fickle.
Although our ability to anticipate the ebbs and flows of investor psychology is limited, we use relative valuation as a barometer of the
market’s affinity for quality. In essence, we use valuation to discipline our quality bias. In practical terms, we seek to initiate new positions or
add to existing ones in quality companies when they are inexpensive relative to their historical relationship to the market as a whole.
Equally important, we seek to reduce or eliminate positions when their valuation relative to the market indicates they are most cherished.
Portfolio construction:
~The top 10 positions will represent 25-35% of the portfolio to allow security selection to drive alpha.
~Position sizes are representative of conviction, liquidity, timeliness, risk profile and valuation.
~The fund will not have more than 2x the benchmark weight in any sector with an absolute maximum sector exposure of 35%.
~The fund will not invest more than 5% in any individual security unless either its benchmark weight exceeds that level
or its active weight at that level is less than 100bps. In either of those two scenarios, the fund will not invest more than
100bps in excess of the benchmark weight.
Our emphasis on sector relative profitability sharpens our focus and narrows our investable universe to a successful and proven cohort of companies whose pedigree inspires confidence across economic cycles. Our emphasis on relative valuation helps us opportunistically invest in these companies, improving our odds of producing excess returns. Equally important, it disciplines us to reduce or divest positions when relative valuation suggests their inherent characteristics are fully appreciated by the market, which reduces our risk of outsized factor and style exposure.
Across economic cycles and irrespective of market moods, we seek to maintain an emphasis on finding high quality, growing companies whose securities are trading at a reasonable valuation with visible catalysts to drive relative outperformance over the next twelve months.
Cash:
The funds cash position is a residual of the number of qualifying investments we can find and is normally between 0-3% of total fund assets. In times of uncertainty, cash is used to minimize downside capture; reduce daily NAV volatility; and to prepare to take advantage of opportunities created by declines in asset values.
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*The investment(s) discussed may not be suitable for all investors. Investors should make investment decisions based on their own specific investment objectives and financial circumstances.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.
**Additional information is available upon request.
***Any investment contains risk, including the risk of total loss, fluctuating prices and uncertain returns.