Investment Strategy

The Critical Path® Unified Portfolio strategies provide you with a complete portfolio solution. The unified portfolio takes the sophisticated engineering used in our Defined Income Separate Account and adds the Reserve Cash Portfolio and Diversified Growth Portfolio to the mix. Through our Critical Path® system we link your client’s investment strategy to their financial plan, providing you with a performance monitoring, relationship management and advanced communication tool to use with your clients.

Methodology

Through our Critical Path system, we maximize the utilization of each underlying asset class held in an investor’s portfolio. In the short run, we take advantage of the best of liability driven investing through individual fixed income securities calibrated to fully immunize and cash-match your client’s income stream in a way that helps insulate clients from short-term market losses. In the long run, we capitalize on the total return benefits of asset class-based equity portfolios to maximize your client’s probability of successfully reaching their long-term financial goals.

Asset Allocation

In today’s volatile markets, clients are looking for ways to manage risks while ensuring that their long-term goals are met. Building on traditional approaches, we have developed a proprietary process for linking asset allocation directly to your client’s financial plan. Utilizing the predictable nature of fixed income to buffer short-term volatility, we harness the power of capital markets to drive long-term returns. By adjusting the time horizon of the Defined Income Portfolio, we construct an overall portfolio that makes your clients comfortable with market volatility while still maintaining high probability of long-term success. Assets are split between the following 3 sub-accounts:

The Reserve Cash Portfolio consists of short-term, liquid, money market securities and is designed to fund the client’s immediate cash flow needs.

The Defined Income Portfolio consists of individual fixed income securities calibrated to deliver cash flows as identified in your client’s financial plan (usually 5 to 10 years). Powerful algorithms are used to select optimal mix of calibrate TIPS, CD’s, Treasuries, agencies, AA /AAA rated corporate, municipal or similar investment grade fixed income securities. Leveraging the predictable nature of fixed income investments, your client’s desired cash flows are matched, regardless of changes in interest rates. Click here to read more about our Defined Income Portfolio process.

The Diversified Growth Portfolio is the growth engine for the overall portfolio. Largely an asset class-based strategy, we use proprietary algorithms to identify asset class tilts that improve the probability of success and manage for downside risk and inflation. Exposure to domestic, developed and emerging equity markets along with select alternative assets are carefully balanced to complement the goals of the Defined Income Portfolio.

Dynamic Rebalancing

Finding the right allocations among equities and fixed income is one of your client’s most important planning decisions. Using the Critical Path as a guide, we monitor the split between the Defined Income Portfolio and the Diversified Growth Portfolio to ensure that the allocations balance your client’s desire for predictable near-term income and long-term probability of success as defined by the financial plan. The Critical Path provides a particularly strong foundation for helping keep your clients invested during volatile markets like we saw in 2008. By appropriately focusing on the long run, our system provides an intuitive tool for communicating options to your clients.