With low correlations to the broad market, our Absolute Return portfolio aims to provide modest, equity-like returns while also minimizing volatility and providing downside protection in poor market environments. Invested in alternative asset classes to enhance its risk/return profile, this portfolio seeks to take advantage of relative market opportunities and add value on a consistent basis.

Risk-Managed Portfolio Construction

The portfolio employs a risk-managed approach that includes combining open-end mutual funds from various asset classes that exhibit low correlations with each other. The portfolio also favors funds in which the portfolio managers stress capital preservation and set absolute performance as the primary goal. The portfolio is diversified across asset classes and invests in global equities, global fixed income, real estate, natural resources, and cash, as well as open-end mutual funds that employ hedged and/or opportunistic investment strategies. These strategies may include long-short, hedged equity, and convertible arbitrage. This broad level of diversification aims to enhance the portfolio’s risk-adjusted performance. Due to the fairly unique nature of the securities in which the underlying funds may invest, the performance of the portfolio will not be highly correlated to traditional asset classes. While the portfolio will always have exposure to various asset classes for diversification purposes, the portion of assets dedicated to certain segments of the market will change to take advantage of relative opportunities presented in the market.

Portfolio Management

Montello Wealth combines quantitative analysis with qualitative due diligence to identify fund managers that we believe offer the best chance to consistently add value on a risk adjusted basis. We use fund managers who employ a prudent, repeatable investment process that has yielded strong results over time. We select appealing funds that contribute to the absolute Return portfolio’s investment strategy. We then continually monitor the portfolio and its holdings to ensure that it remains consistent with its stated investment objectives.

A Powerful Solution for Investors

What’s the result of combining sophisticated portfolio construction, discerning manager research and a variety of alternative investment strategies? A low-volatility investment solution that seeks capital appreciation and protects against loss.

Strategies within the portfolio

Long-Short Equity—Combines a long position (contracts bought exceeds number sold) in one security with a short position (number of contracts sold exceeds number bought) in another. While the funds using this strategy are attempting to protect their portfolios against market declines, they are susceptible to stock investing risks. Share prices will be affected by market activity and declines are possible.

Hedged Equity—Helps limit investment loss by creating a transaction that offsets an existing position in a contract that provides the right to buy or sell shares of a security at a specific price for a certain time.

Convertible Arbitrage—Includes the purchase of convertible securities and the sale of the underlying common stock. These securities tend to be convertible bonds or convertible preferred stocks that may be converted into the stock of the same company. This strategy strives to gain profits from potential pricing errors made in the conversion and is typically included in the equity component of a portfolio.

Merger Arbitrage —Seeks to profit from the successful completion of corporate organizations. The process commonly used to execute this approach involves purchasing shares of an announced acquisition target company at a discount to their expected value upon completion of the acquisition. Hedging strategies are utilized to reduce market exposure and volatility.