Investment Portfolio Construction Enhancements
Published August 25, 2020
As a fiduciary and trusted financial advisor, Cape Cod 5 is committed to working in the best interest of our clients and providing relevant facts and updates as to our processes and approach. The purpose of this update is to provide you with information relative to some enhancements we are making to our portfolio construction.
The current market environment has prompted our investment team to implement a number of dynamic changes to portfolios. These enhancements reflect weeks of research and statistical analysis incorporating forward-looking expectations in both the equity and fixed income markets. When considering changes, we look at an intermediate time horizon with the goal of providing value that endures over many quarters.
The investment portfolio construction process is a complicated exercise. We begin with the current portfolio, then incorporate current economic conditions with future expectations. We add a comprehensive list of potential investments and analyze outcomes using a variety of tools including sophisticated “optimization” software. Our objective is to identify opportunities that reduce risk, enhance return, or offer some combination of the two. A sample output is illustrated in the chart below:

The result of this exercise is the addition of three new asset classes: 1) Treasury Inflation Protected Securities; 2) Emerging Market Debt and; 3) Precious Metals. We expect the net effect of these additions to reduce extreme drawdown in equities while improving credit quality and diversification in fixed income.
When evaluating investment managers we focus on experience, style purity, liquidity, cost, tax efficiency, performance and consistency of return. The investment team is agnostic when considering active versus passive managers, preferring to concentrate on the focus areas listed above. For the most part, the process has led to mostly passive manager representation. These new asset classes are no exception.
Below please find a brief overview of the new asset classes being introduced as part of Cape Cod 5’s portfolio construction enhancements
As always, do not hesitate to call our team with any questions. We will begin the transition in August, carefully considering individual tax implications throughout the process.
Contact our Wealth Team More Market Insights from Cape Cod 5
Michael S. Kiceluk, CFA, Chief Investment Officer
Brad C. Francis, CFA, Director of Research
Lee C. Gatewood, Senior Investment Officer
Jonathan J. Kelly, CFP®, CPA, Senior Investment Officer
Sean F. McLoughlin, CFP®, CIMA, Senior Investment Officer
Robert D. Umbro, Senior Investment Officer
Kimberly K. Williams, Senior Wealth Management Officer
Craig J. Oliveira, Investment Officer
Christopher E. Chen, CFA, Investment Analyst
These facts and opinions are provided by the Cape Cod Five Trust and Asset Management Department. The information presented has been compiled from sources believed to be reliable and accurate, but we do not warrant its accuracy or completeness and will not be liable for any loss or damage caused by reliance thereon. Investments are NOT A DEPOSIT, NOT FDIC INSURED, NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, NOT GUARANTEED BY THE FINANCIAL INSTITUTION AND MAY GO DOWN IN VALUE.