The performance records established by our professional staff, in the very volatile markets of the past several years, can be directly attributed to our disciplined investment philosophy; a commitment to provide each client with a consistent real return over full market cycles, within their specific investment and risk parameters.
Based upon defined client objectives, the firm manages several distinct types of accounts: equity, balanced growth and income. In each category, the firm considers itself a long-term investor with the intent of minimizing the risk inherent in managing assets in highly erratic markets.
The returns achieved by Serco Investments have been produced through the application and implementation of a flexible discipline governed by the following guidelines:
Real Return: Serco Investments is committed to attaining and preserving rates of return in excess of inflation over full market cycles.
Performance Objectives: To obtain and protect growth of capital, while minimizing risk, the firm's investment policies are based upon these goals:
- Rising markets - superior participation;
- Falling markets - better than general market performance;
- Sideways markets - superior participation
Asset Mix: Fully realizing the need for flexibility and controlled risk, Serco Investments attempts to respond to longer-term fluctuations in the market with appropriate changes in portfolio mix:
- Emphasis on equities in rising markets;
- The utilization of cash equivalents in falling markets, or when the strategy of the firm indicates few quality buying opportunities due to weak fundamentals or overvaluation in the market place.
Long-Term Investment Horizon: In addition to flexibility, consistency has been a key element in our successful performance. Assuming the right investment decisions are made, Serco Investments typically utilizes a two to three year time horizon for all investments.
Value-Added: The portfolio performance record and current philosophy/discipline have generally provided:
- Below market risk;
- Above market return.
Historical evidence suggests that equities have provided a better hedge against inflation than other investment alternatives. Accordingly, they deserve emphasis in most portfolios where performance is the primary objective.
Disciplined Investment Approach: An extremely strong buy/sell discipline is utilized to avoid the purchase of stocks that may be fads, hot stories, turnarounds, etc. The sell discipline is largely a function of changes in fundamentals or price.
Approach: A top-down approach is utilized to establish the asset mix and other investment policies. However, the firm has built its record on the ability to pick high-performance stocks using a bottom-up approach.
Sideways Markets: The firm's equity philosophy places major emphasis on the ability to produce superior returns during sideways market conditions. This is chiefly a function of the types of securities owned by the firm, and our buy/sell discipline: selective buying on intermediate weakness; selective selling on intermediate strength.
Stock Listings: Stocks are generally listed on the New York and American Stock Exchanges, with a select few large capitalization stocks on the NASDAQ.
Fixed Income Philosophy
The fixed income policy is dictated by our expectation of the trend of interest rates. We look at interest rates in three different time horizons: short, intermediate and long.
Bonds: Based upon current market conditions, the firm's bond philosophy would indicate owning governments and agencies predominantly, and some A or better corporates, with a maximum maturity schedule of 10 years. Bonds would be purchased more for their high income and historical stability than for market appreciation.
Cash Equivalents: Short-term securities are heavily emphasized during declining markets when alternative investments exhibit weakness. During rising markets the firm is usually fully invested with only a small cash reserve for buying opportunities.
Interest Rates: Serco Investments does not attempt to time short-term rates with fixed income investments.
Copyright © 2004-2012, Serco Investments, Inc.