At Winthrop Capital Management, we believe a disciplined investment process combined with thoroughly researched security selection results in consistent performance relative to a benchmark. We believe strongly in a team approach to decision making, requiring that our people are well trained in their roles as analysts, traders and portfolio managers.
In order for a solid investment process to be effective, established systems must measure and monitor each step to determine if we are adequately compensated for the risk being taken.
With our goal to create consistent risk-adjusted portfolio returns, we analyze every part of a portfolio and will allocate securities, sectors, and asset classes based upon their respective risk weight, rather than nominal weight. At Winthrop Capital Management, we utilize proprietary risk models to build and manage portfolios. This approach is particularly important during times of market crisis when correlations increase and assets decline together.
We build our portfolios from the bottom, at the security level. However, we implement a top-down, thematic view of the marketplace in order to manage risk. We look for opportunities across all the major asset classes and thoughtfully diversify the portfolio.
The WCM process starts with idea generation. Generally speaking, all investment professionals are parsing the same information; however, accessing and analyzing that information through consistent filters is critical to our process. Our investment ideas originate from our collective professional experience, quantitative analysis, our research, financial publications as well as our trading relationships and Wall Street.
In order to manage portfolio risk, it is critical to understand the underlying credit and structural risks of each security. In our analysis, we use a combined approach of a top-down and bottom-up analysis in order to properly understand the macro environment, secular industry trends, and the role each company plays in the market. We value every part of the company’s capital structure and invest in companies with strong balance sheets, and sustainable business models that produce strong free cash flow.
Each of our portfolios is structured with the objective of outperforming its respective benchmark. To achieve this, WCM blends fundamental knowledge of the underlying securities and their market-trading levels. Each security is assessed individually and collectively to ensure that the portfolio adheres to the client’s IPS.
Risk management requires continuous monitoring of the portfolio structure relative to its benchmark. This step is the key to outperformance. Our proprietary investment software, WOMBAT™, and risk scoring system enables us to identify portfolio risks, both in the portfolio structure and in underlying securities.
The fifth step is to monitor each security for potential sale if and when it no longer fits its intended objective in a portfolio. While it might be intuitive to sell securities that have performed well, it is just as important to sell underperforming securities that no longer fit their original thesis. Our exit strategy for any security is determined at the time of purchase, so we have clear, actionable risk controls in the portfolio.