 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||||
1. How do you conduct your investment analysis and decision making?
The Pacific Financial Group, Inc. does not cling to any single narrow methodology of investment analysis and decision making.
We combine various classical approaches into a methodology we call "Rational Analysis."
Our method of "Rational Analysis" uses many methods but focuses on:
Economic Analysis
The basic economy of the United States of America is the platform from which all domestic investing is launched. Additionally, it is a powerful force to be reckoned with on the international front. We pay close attention to what is going on domestically so that we may understand the “atmosphere” in which we are investing. If the United States economy is growing, money supplies are expanding, interest rates are falling, inflation is low, consumer confidence is high, inventories are in line, and measures of production are growing sustainably. Thus, the probability of growth in the foreseeable future is therefore enhanced. If, however, the environment is negative, the near term future may be more questionable.
International Economic Analysis
The analysis of the economies of foreign countries is essential before investing therein. We limit our investing overseas to those countries that are currently expected to outperform the United States economy. Before taking a position with a target country, we satisfy ourselves that a country has the economic climate to encourage the current growth we are expecting.
Fundamental Analysis
Fundamental Analysis is the economic research of such factors as interest rates, gross domestic product, inflation, unemployment, and inventories used as tools to predict the directions of the economy. Our economic analysis consists of daily tracking of over 30 economic variables that are material to the current market condition. Constant attention is paid to how the political climate may affect market performance. Detailed analysis of corporate profits and their impact on long-term market movement is constantly reviewed.
Technical Analysis
Technical Analysis is accomplished by consistently focusing on price trend identification and forecasting. Secondly, by performing momentum studies we can target sectors and asset categories with the greatest potential for growth. Historical analysis blended with experience, assists in pattern identification.
Quantitative Analysis
Quantitative Analysis consists of evaluating investment decisions to ensure that expected return outweighs potential risk. It also includes monitoring market risk by using statistical models in order to identify opportunities and avoid probable pitfalls. Finally, in predicting future market growth, Time Series Modeling is utilized. Time Series Modeling is advanced computer driven analytic and econometrics processing applied to data derived from sequential time periods. Modeling is based upon numeric values that occur over time.
2. What are the range of services that you provide?
When you invest with The Pacific Financial Group, Inc., you will receive a range of services within your investment portfolio, as listed below.
Investment services within your portfolio:
For your retirement plan, the following services are available for your trustees and plan participants:
Services Provided to the plan participants and the trustees:
3. How does The Pacific Financial Group, Inc. get paid?
We are a "Fee Based" investment advisor. The compensation that we receive is directly from our clients and we receive a small amount from soft dollar considerations for transactions processed. All fixed income instruments are purchased at institutional wholesale cost and are delivered into client accounts at our cost. No mark-ups or commissions are assessed. "Principal traces" are never used, and all trading costs are fully disclosed.
4. Tell me about The Pacific Financial Group, Inc.
The Pacific Financial Group, Inc. is registered with the Securities and Exchange Commission under provision of the Investment Advisors Act of 1940 and, under terms of ERISA 3(38), and DOL Reg. 2509.75-5, is fully qualified to serve as an Investment Advisor. The Pacific Financial Group, Inc. was founded for the purpose of providing superior asset management and investment advisory service which include:
In addition, The Pacific Financial Group, Inc. further distinguishes itself by prohibiting the following:
The Pacific Financial Group, Inc. is structured to provide quality investment advice, as professionals, and timely service to each client. We have invested in the best available people, monitoring, and data processing systems in order to retain the freshness and flexibility that are crucial during volatile times.
5. Investment Strategies That Make Sense
Using Exchange Traded Funds (ETF’s)
We are often asked questions as to our strategies and the incorporation of Exchanged Traded Funds (ETF’s) into our portfolios. The following is a quick review of Exchange Traded Funds: what they are and why we use them. We also hope to resolve some confusion regarding the use of ETF's in actively managed investment portfolios.
What is an Exchange Traded Fund?
ETF’s represent shares of ownership in either a fund, a unit investment trust, or a depository receipt that holds portfolios of common stocks or bonds. These portfolios closely track the performance and pidend yield of a wide variety of specific indices which include broad markets, industry sectors, international markets and fixed incomes. The idea behind ETF's was simple but brilliant: issue exchange tradable securities representing a broad basket of investments. The first one, Spiders (SPDR), designed to emulate the S&P 500, was issued in 1993.
What do ETF’s look and act like?
ETF’s were introduced as securities representing a well-known index such as the S&P 500 or the NASDAQ. However, ETF’s can also represent investment styles, such as value investing or growth investing, and sectors of the economy such as banking, consumer cyclicals or basic materials. Additionally, ETF's can offer investments in most international exchanges and foreign economies such as France, Canada, Indonesia, Korea and so on. This gives us the ability to construct portfolios from segments that appear favorable in the present economic situation and to avoid those that are out of favor.
Why do we use ETF’s in our portfolios?
ETF’s have become an important element in the execution of our investment strategy over the last few years. They provide a number of advantages not available with no-load mutual funds. ETF’s can be traded any time throughout the trading day; you do not have to wait for end-of-day closing prices to trade (like mutual funds). ETF’s also have very low internal cost, usually much less than a no-load fund. There are ETF’s that represent almost any asset class, capitalization category and style, without any style drift (often associated with actively managed no-load funds). ETF’s offer an excellent means for investing in international strategies, and are free from the problems of off-shore mutual funds. In short, ETF’s are an efficient tool for executing our investment strategies.
Isn’t the use of ETF’s just indexing?
The answer to this question is an unqualified NO. To clarify, indexing is a passive strategy intended to follow one specific index. It prevents the ability to respond to the inevitable changes in the marketplace. We are active managers, and ETF’s allow us greater precision in designing and building ourportfolios.
For example, our analysis may show that our Equity Portfolio should be allocated to 5% Super Large Cap Composites, 20% Large Cap Value, 10% Large Cap Growth, 20% Mid-Cap Value, 15% Small Cap Value, 15% Total Market, 5% Brazilian, 5% European Union Large Caps and 5% Emerging Markets. The mix of investments in this example would represent our best thinking of how to efficiently achieve the appropriate risk and return combination to meet portfolio objectives. It would not match any index that I am aware of. As active managers, we are analyzing the market and developing that blend of investments that best meet our goals.
OK, it isn’t just indexing, but why not also buy some hot mutual funds?
We have always avoided actively managed mutual funds that “really jump”, because of the “Champ or Chump” syndrome. We have found that yesterday’s “Champ” active mutual fund manager is often tomorrow’s “Chump”. It is our job to manage your portfolio in such a way to generate the returns that are expected within the risk parameters stated for the portfolios. With an actively managed mutual fund, very little is known about what the portfolio managers are doing and when they are doing it. ETF’s are fully transparent; we know what they are doing at all times and, for the most part, they are doing it very efficiently. We are able to implement our investment strategy with greater accuracy, without having to guess what mutual fund mangers may or may not be doing. ETF’s also remain style consistent.
Do we use ETF investments in all our portfolios?
Yes, we now use ETF’s for all our non-annuity portfolios, in some fashion. We do not use them in our annuity accounts at this time, because they are not yet available within variable annuities that we manage. If the annuities would make them available in their sub-accounts, we would probably use them.
Do we only use ETF’s?
No, we use a mix of investment vehicles. We use certain no-load index or sector mutual funds that meet our investment criteria. These mutual funds must be style consistent, transparent, and have internal costs that are reasonable. To elaborate, each portfolio uses ETF’s in a different concentration, based on the strategy involved. Our Equity, Balanced and Income Portfolios use ETF’s to build the core of the portfolio, and we integrate no-load mutual funds to provide peripheral enhancements. Our Tax Managed Portfolio exclusively utilizes ETF's for several reasons. First, ETF’s provide an investment vehicle that has no imbedded capital gains or losses, unlike mutual funds. The Tax Managed Portfolio has very low turnover (5% to 8% per year) to reduce the number of taxable events. The low internal cost of ETF’s and static portfolios within them make them well-suited for this type of account. In the Absolute Return Portfolio, we use ETF’s to build the core, but also use individual stocks and no-load equity or bond funds for the peripheral enhancements. The Targeted Equities Portfolio uses individual stocks to build the portfolio, with ETF’s used as a stabilizing element during times of uncertainty.
ETF's, whether used exclusively or in combination with other investment vehicles, allow additional flexibility in structuring our portfolios, so that we may meet the objectives specific to each portfolio.
6. How does The Pacific Financial Group, Inc. add value for the client?
The most significant benefit TPFG provides is active management of the client’s portfolio. This involves four daily steps including evaluating current economic and market conditions, establishing target allocations, selecting appropriate funds, and reallocating assets as needed. Through this process, TPFG seeks to minimize risk and maximize the return of each portfolio.
7. How long has The Pacific Financial Group, Inc. been in business?
TPFG has been helping individuals, corporations, trusts, and pensions achieve their financial goals since 1984.
8. What investment options does The Pacific Financial Group, Inc. provide?
We offer four distinct management options:
James McClendon, CEO, Managing Director and Senior Portfolio Manager
Jim started his professional career in 1962. His expertise in asset and liability management and investment experience with large national firms proved invaluable when he founded The Pacific Financial Group, Inc. in 1984.
Keith Swanson, CFA®, Portfolio Manager
Keith’s career in financial analysis began in 1994 as a portfolio manager and analyst with Washington Capital Management, where he co-managed the Value Fund as well as individual, high net-worth portfolios. Keith earned a Masters of Science in Finance from Seattle University and a BA in Business from University of Washington. He is a holder of the right to use the Chartered Financial Analyst™ designation. Currently, Keith provides securities analysis and a fresh outlook on market trends, economic theory, and portfolio construction in the formulation of strategy.
Jennifer Enstad, Portfolio Manager
Jennifer is a Portfolio Manager and has been with The Pacific Financial Group, Inc. since 1990. She graduated from the University of Washington with a BA in Business Administration, majoring in Finance. In addition to her under¬graduate studies, she is currently a CFA® Level III candidate. Jennifer is an integral part of the investment team and works closely with Jim and Keith in the construction and maintenance of the portfolios. Jennifer’s long tenure with our firm illustrates her dedication to the success of our firm and its clients.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
10. Does The Pacific Financial Group, Inc. manage money within variable annuities?
Yes, TPFG manages portfolio allocations of industry leaders such as American ING, Lincoln Benefit Life, Jefferson National, Pacific Life, The Hartford, and more.
11. How often can clients expect changes in their portfolio?
TPFG has no preconceived time line from which changes are made. Allocation changes are totally dependent upon market and economic conditions.
12. Once a client invests with The Pacific Financial Group, Inc., are they “locked in” for any specific period of time?
No, however we do recommend an investment horizon of at least 3-5 years.
A benchmark is a standard, usually an unmanaged index, used for comparative purposes in assessing portfolio performance. To determine if your portfolio returns are competitive, you would measure them against a benchmark. An appropriate benchmark would be one that is allocated similarly to the portfolio.
