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The Montgomery Institute

The Montgomery Institute. Investment Proposal December 2013. History of Investment Policy Changes. Account History. 10/15/2013 All Cash Model. 10/24/2004 Tactical Equity Model. 7/9/2009 Tactical Allocation Model. Growth & Income Model. Annual Returns since inception.

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The Montgomery Institute

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  1. The Montgomery Institute Investment Proposal December 2013

  2. History of Investment Policy Changes

  3. Account History 10/15/2013 All Cash Model 10/24/2004 Tactical Equity Model 7/9/2009 Tactical Allocation Model Growth & Income Model.

  4. Annual Returns since inception

  5. Fund Return since Inception

  6. Creating the TMI Portfolio • Define Objectives • Identify Constraints • Determine Allocations • Manage To Policy

  7. Universal Investment Objective The goal of any investment portfolio should be to achieve the highest return for an acceptable amount of risk.

  8. Identifying Constraints: Personal Risk Tolerance Where is Your Pain Point? • How much loss are you willing to accept in any given 12 month period? %

  9. Identifying Constraints: Time Horizon • Investment returns become less volatile over time. The longer the time horizon, the less short term risk affects the account. • The account is an endowment which is considered “long term” however, • Drawdown policy of 5% requires a short term focus. Source: Schwab Center for Financial ResearchFigure 1: Range of S&P 500 returns, 1926-2011

  10. Identifying Constraints:Liquidity Requirements How much of the account should be convertible to cash in a short period of time? • The account may be required to liquidate 5% of its holdings each year

  11. Identify Constraints:Drawdown Requirements • The account must support a 5% annual drawdown. • Minimizing the volatility of the account will allow for more predictable income.

  12. Step 3: Determine Allocations

  13. Determine AllocationsDominant Benefit Asset Allocation • Choose the percentage that you want to allocate among the Dominant Benefit provided by the investments.

  14. Determine Allocations:Asset Class Selections

  15. Determine AllocationsExpectations of risk and return Source: Morningstar

  16. Active Management We select top-tier managers and implement tactical and tax management strategies to the portfolio to capture as much Upside while avoiding the potential Downside of the asset classes.

  17. Proposed Portfolio Allocation

  18. Portfolio Performance

  19. Portfolio Performance vs Benchmark

  20. Step 4: Manage to Policy

  21. Manage to Policy Rebalance the account quarterly Maintain a consistent policy going forward Resist changes to policy based on performance or economic cycles

  22. Product Sheets

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