Our investment philosophy is built on establishing a trust relationship with our clients. We take a client-centered, fiduciary approach to investing our clients’ assets. We are dedicated to putting the needs of our clients first.
Our investment methodology starts with listening to our clients’ needs. We want to understand the goals and constraints that are unique to their situation and construct a portfolio that fits those needs. We consider factors such as life-cycle, time horizon, liquidity, risk aversion, and policy limitations to develop an appropriate asset allocation.
We believe that asset allocation is one of the most important decisions in the investment process. We take a multistep approach to allocating our clients’ assets. We start with a big picture approach of assessing the right balance of risk and return using broad categories of equities, fixed income securities, and cash equivalents. We maintain four models that represent different levels of risk and return as a baseline for asset allocations. We then further breakdown the target allocations into sub-classes such as Large Cap Equity, Mid-Cap Equity, Small Cap Equity, International Equity, Intermediate-term Bonds, Short-term Bonds, and Cash Equivalents. We also establish dynamic target ranges for each class depending on asset type and size. The final step in the asset allocation process is the selection of the individual securities. We maintain buy lists of rigorously researched and analyzed mutual funds, stocks and bonds to construct a portfolio to meet our clients’ needs.
Portfolio Construction using Non-Proprietary, External Research
First Farmers uses a variety of investment securities to match the needs and objectives of the individual accounts. Stocks, bonds and mutual funds are analyzed by external Registered Advisory Firms in consultation with the Department’s officers, and investments are chosen for their suitability to the account and the balance of investment return to risk. The officers review current investments owned by the Department to determine their continued appropriateness for the account. In addition to the services provided by the external advisory firms, investment research is also obtained from Morningstar, the Wall Street Journal, Bloomberg, and other various sources.
We use a two pronged approach to research and security selection in fixed income. We evaluate individual bonds for either total return or current income to fit the needs and requirements of each client. Our securities analysts consider the credit quality, interest rate risk, maturity/duration, yield, and other fundamentals to develop the foundation for the fixed income portion of a portfolio.
Our equity research uses proprietary quantitative modeling to develop fair market values that support our buy, sell, hold recommendations. We also incorporate top-down economic research combined with our bottom-up approach to security selection. Our equities “buys” are then further separated into a core equity option for accounts seeking total return and an equity income option for accounts seeking a higher level of current income.
We also utilize institutional class mutual funds and ETFs that provide a broad range of asset classes to diversify and provide liquidity to portfolios. The mutual funds provide exposure to different areas of the market for establishing the right asset allocation and rebalancing. Our external advisory firms and analysts review thousands of mutual funds to find the ones that balance risk and return and fit the fiduciary environment of the Trust & Financial Management Department. The funds that the department utilizes are reviewed for return, vitality, style, consistency, and relative performance.
Investments made through the Trust & Financial Management Department are not bank deposits and are not FDIC-insured, nor are they an obligation of or guaranteed by any bank or savings institution. All such investments involve risk, including the possible loss of principle invested. NO BANK GUARANTEE | NOT FDIC INSURED | MAY LOSE VALUE