Preserving and Growing Wealth

CSM seeks to preserve and grow wealth for its clients over a long time horizon. We believe that the best yardstick of performance is real return. We evaluate all investments on an after tax, after fees basis. Client portfolios are fully invested and we do not attempt to time markets.
 

Asset Allocation and Portfolio Construction

Asset allocation is the primary determinant of investment performance. We construct a bespoke, balanced portfolio for each client, taking into account risk tolerance, return objectives, time horizon, and liquidity needs. We believe that in order to generate real returns above inflation, investors must accept equity-like risk.

Client portfolios typically include allocations to public equities, fixed income, real estate, and alternative investments. Public equity investments are diversified geographically and utilize both active management and passive, low cost indices. We establish target asset allocations at least once a year, and may make tactical adjustments during the course of the year as asset classes become more or less attractive. 
 

Active Versus Passive Management: Fees and Taxes

Consistent outperformance by active managers over market benchmarks is increasingly rare. For core positions in large capitalization stocks, we utilize tax-optimized indexation with very low management fees. For less efficient asset classes where manager outperformance is more achievable, we utilize carefully chosen active managers with long term records of above-market performance. We monitor the portfolio turnover and tax efficiency of all investment vehicles.
 

Alternative Assets and Illiquidity Risk

We believe that in certain asset classes, investors can be well compensated for illiquidity risk. We develop an illiquidity budget with each client, which takes into account risk tolerance, possible distribution needs, and other factors. Within this budget, we allocate assets to a variety of sectors, including income producing real estate, primary and secondary private equity, and private credit. We also invest selectively in hedge funds, to access specialized investment strategies which are not readily available through liquid investment vehicles.

Both income producing real estate and hedge fund investments balance the equity exposure in our client portfolios, and serve as an alternative to traditional fixed income. They are expected to generate returns which are uncorrelated to equity markets, and are less volatile.

Investment Process & Due Diligence

CSM devotes significant resources to accessing third party software and databases, in order to evaluate existing and potential managers, and to optimize its portfolio construction. We utilize the software and databases to initially screen managers for performance and to benchmark their performance versus various indices. Subsequently, individual manager performance is evaluated in more detail using Sharpe ratios, correlations, standard deviations, and many other variables. We perform Monte Carlo simulations on model portfolios, using a variety of asset allocations and different combinations of managers, as a tool to understand likely future performance. 

The principals of CSM have long and deep experience in the investment business, and as such possess a wealth of knowledge about individual managers, which we use to augment the above analysis. In addition, we frequently discuss managers with other major individual and institutional investors. To a lesser extent, we utilize information about new managers received from capital introduction groups of prime brokers and from third party marketers. CSM maintains an active list of both ‘long only’ equity managers and of alternative managers, targeting a variety of sectors and using a range of investment styles, which it is evaluating at any point in time. 

Our due diligence process typically involves multiple meetings with both senior officers of the investment manager, as well as with individual portfolio managers and analysts. This process takes several weeks at a minimum and often several months. All new managers must be formally approved by our Investment Committee which includes Christopher Moore, Peter Pell, Eric Hantman, Julia Fowler, Grace Sterritt, and Gus Vlamakis.

Investor Reporting

CSM Capital utilizes Fortigent, LLC to assist in generating monthly, quarterly, and annual client performance reports, using data generated directly from CSM’s custodians, or from the investment manager itself. Fortigent provides wealth management solutions and consulting services to independent advisors, banks, and trust companies which includes data aggregation and consolidated performance reporting.

Data aggregation may be prepared regardless of custodian and a consolidated report generated on all assets within the investor’s portfolio, including assets not under direct advisement. Assets are time and dollar-weighted for performance, both gross and net of fees. 

The consolidated reports provide a comparison of how an individual manager performs in relation to peers or the broader universe of managers. This information also makes it possible to compare the performance to hundreds of different standardized or customized indices, providing rigorous benchmarking. Our consolidated reporting tracks the flow of funds in each account and provides complete transparency of any associated fees (for example, custodian fees or CSM management fees). 

In addition to periodic performance reports, CSM Capital provides the following:

• Weekly e-mail sent out every Friday afternoon containing a summary of market related events.

• Monthly, quarterly, and annual newsletters accompanying the performance report providing detailed qualitative and quantitative analysis.

Performance Monitoring & Controlling Risk

CSM constantly monitors the performance of all of its investment managers. We review periodic investment performance data, both on an absolute basis and relative to appropriate indices, as well as any qualitative written material provided by our managers and by third parties. Although we are long term investors on behalf of our clients, we carefully look for any evidence of degradation in a manager’s capabilities. Through dialogue at the most senior level, we seek to understand the sources of both outperformance and underperformance.