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 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.