By Orlando Roche
Looking back throughout the history of financial markets, uncertainty has been the norm rather than the exception. This has been especially true throughout the new millennium, as the past 12 years have seen a series of booms and busts across a variety of asset classes culminating in the financial crisis of 2008. Since 2008, global markets have found their footing after a series of central bank policy actions were implemented to stabilize and restore confidence in the global financial system. These actions have led to a slow, albeit unsteady, improvement in the economy and financial market performance. Despite this improvement, uncertainties persist and investors continue to feel reluctant to put hard earned capital at risk, a sentiment we at Sabadell Bank & Trust completely understand.
At the core of our investment approach is the principle of capital preservation and a keen focus on managing market risk. Our process begins with gaining a thorough understanding of our client’s objectives based upon their requirements for cash flow, liquidity, taxes, and estate planning. The next step involves an analysis and discussion of market risk. In today’s market environment it is not enough to view risk solely through the prism of traditional analysis. Our approach looks at risk beyond the basic understanding of market fundamentals to include a broad study of structural risk, technical risk analysis and behavioral risk analysis in order to have as complete a picture as possible of the investment landscape before putting client capital to work. This discussion leads to gaining insight as to the client’s understanding and tolerance for market risk. By matching the client’s needs and objectives to an appropriate risk profile we can proceed to the design and implementation of a strategic investment plan.
The portfolio construction phase of our process takes into account the client’s unique circumstances and risk appetite and matches it to our firm’s investment outlook to ensure we are creating a strategic asset allocation that achieves the dual mandate of preserving capital while meeting the client’s objectives. Sabadell has access to top tier investment managers across a variety of asset classes to ensure proper diversification when building our portfolios. These outside managers are subjected to a strict due diligence process and must demonstrate their capabilities before being eligible for addition to our open architecture investment platform. In addition to a stable of best of breed managers, we also have a traditional in-house investment team that manages a portfolio of large cap equities and municipal bonds, which can be added to our list of investment offerings to meet our client’s needs.
When constructing portfolios, we typically diversify client capital across a spectrum of assets to include global equities (domestic, international and emerging markets), global fixed income, and alternative investments including real estate investment trusts, Master Limited Partnerships, commodities and cash. The percentages allocated to each asset class are dependent on each client’s specific needs and risk tolerance as reflected in their respective Investment Policy Statements. We operate within ranges in the strategic asset allocation to be able to make tactical adjustments at times that we feel are appropriate based on our outlook in the short to intermediate term. This flexibility allows us to proactively reduce risk and take advantage of opportunities as they arise.
Once a strategic asset allocation model is designed and implemented, we meet with our clients on a quarterly basis to review the progress of the plan, revisit the client’s Investment Policy Statement, and reassess the client’s risk tolerance to ensure that we are on track and aware of any changes in the client’s circumstances.
Managing wealth in uncertain times requires a consistent repeatable process that takes into consideration a client’s long-term strategic needs and balances them against short and intermediate term risk and opportunities that avail themselves in the natural course of a market economy. By focusing on capital preservation as the cornerstone of our approach we attempt to lower the volatility that markets have experienced in recent years and grow our clients’ portfolios in a consistent and steady manner. By monitoring our progress and communicating with our clients on an ongoing basis, we can make adjustments along the way to ensure we are keeping up and meeting the client’s needs. While we have seen an improvement in the global financial markets, we continue to believe that this process is essential to provide excellent results to our clients despite living and managing wealth in uncertain times.
Orlando Roche is the regional president of Sabadell Bank & Trust Miami-Dade County. He is responsible for overseeing private banking, wealth management and fiduciary services within the region. Roche has over 25 years of experience in private wealth management.Originally from Havana, Cuba, Roche was raised in Miami and is currently located in Sabadell’s Miami office. He earned a BBA from Florida International University with a major in Finance and Economics.
South Florida Legal Guide Midyear 2013 Edition