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 of the United States
  • International Economic Analysis
  • Fundamental Analysis
  • Technical Analysis
  • Quantitative Analysis

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.

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:

  • A variety of Managed Investment Accounts
  • Econometric Modeling
  • Asset Allocation Modeling
  • Sector Analysis
  • Advanced reporting through Orion Advisor Services
  • Daily monitoring of investment performance
  • Quarterly Newsletter

For your retirement plan, the following services are available for your trustees and plan participants:

  • Assistance in the development of the Investment Policy Statement
  • Quarterly Investment performance reporting and quarterly meetings
  • Acceptance of full fiduciary responsibility for retirement plans

Services Provided to the plan participants and the trustees:

  • Selection of investment vehicles for participant direction
  • Participant Educational Workshops
  • Pre-Retirement Planning Seminars
  • Individual Investment Counseling
  • Communication of investment options and strategies to plan participants, including:
    • Quarterly Newsletter
    • Group participant meetings
    • Individual participant counseling

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 trades” are never used, and all trading costs are fully disclosed.

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:

  • Personalized portfolio structuring and servicing
  • Advanced accounting and reporting techniques
  • Ability to monitor investment performance on a daily basis
  • Enhanced investment performance through asset allocation and sector analysis
  • Accepting full fiduciary responsibility for retirement plan assets
  • Qualification under ERISA guidelines to serve as an Investment Advisor

In addition, The Pacific Financial Group, Inc. further distinguishes itself by prohibiting the following:

  • Charging commissions of any kind
  • Affiliating with any one broker/dealer
  • Acting as a financial intermediary

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.

Investment Strategies That Make Sense

Using Exchange Traded Funds (ETFs)

We are often asked questions as to our strategies and the incorporation of Exchanged Traded Funds (ETFs) 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 ETFs in actively managed investment portfolios.

What is an Exchange Traded Fund?

ETFs 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 ETFs 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 ETFs look and act like?

ETFs were introduced as securities representing a well-known index such as the S&P 500 or the NASDAQ. However, ETFs 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, ETFs 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 ETFs in our portfolios?

ETFs 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. ETFs 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). ETFs also have very low internal cost, usually much less than a no-load fund. There are ETFs that represent almost any asset class, capitalization category and style, without any style drift (often associated with actively managed no-load funds). ETFs offer an excellent means for investing in international strategies, and are free from the problems of off-shore mutual funds. In short, ETFs are an efficient tool for executing our investment strategies.

Isn’t the use of ETFs 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 ETFs 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. ETFs 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.  ETFs also remain style consistent.

Do we use ETF investments in all our portfolios?

Yes, we now use ETFs 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 ETFs?

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 ETFs in a different concentration, based on the strategy involved.  Our Equity, Balanced and Income Portfolios use ETFs to build the core of the portfolio, and we integrate no-load mutual funds to provide peripheral enhancements. Our Tax Managed Portfolio exclusively utilizes ETFs for several reasons.  First, ETFs 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 ETFs and static portfolios within them make them well-suited for this type of account.  In the Absolute Return Portfolio, we use ETFs to build the core, but also use individual stocks and no-load equity or bond funds for the peripheral enhancements.

ETFs, 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.

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.

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.

What investment options does The Pacific Financial Group, Inc. provide?

We offer four distinct management options:

  1. Separately Managed Account (SMA)
    This option is a highly custom portfolio that contains investment options designed for specific client needs – and one that can be tuned for particular tax sensitivities. Though it can accommodate a minimum investment of $50,000 many advisors find this option ideal for clients with investable assets of more than $100,000.
  2. Managed Portfolio (MP)
    This option leverages our proprietary mutual funds to minimize fees – but without compromising any investment discipline. Each mutual fund represents a specific investment strategy and directly reflects any changes made to that strategy by our portfolio-management team. Because these funds consolidate multiple and like transactions, they are a perfect blend of top-of-the-line active money management and cost-effective investing.
  3. Variable Annuity Optimization (VAO)
    This option uses sophisticated analytical processes to accurately define variable annuity sub-accounts that are notorious for style drift. We then use these results to rebalance our variable-annuity portfolios with greater clarity and precision. Because most annuity companies offer only a small universe of investment choices, we use our equity and balanced strategies to support this option.
  4. Retirement Plan Management (RPM)
    This option is ideal for 401(k), 403(b), or 404(c) plans that are held at various custodians. We offer turnkey and custom plans using the mutual funds and asset classes offered by the sponsoring company. We accept full fiduciary responsibility for managing accounts. Further, we provide a legal safe harbor as defined by the applicable sections of the ERISA federal retirement law and the Internal Revenue Service Code.

Who is involved with The Pacific Financial Group, Inc. portfolio management?

James McClendon, Managing Director and CIO
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.  She is a holder of the right to use the Chartered Financial Analyst™ designation. Jennifer is an integral part of the investment team and works on the construction and maintenance of the portfolios. Jennifer’s long tenure with our firm illustrates her dedication the success of our firm and its clients. CFA® and Chartered Financial Analyst™ are trademarks owned by CFA Institute. CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Does The Pacific Financial Group, Inc. manage money within variable annuities?

Yes, TPFG manages portfolio allocations of industry leaders such as Voya, Jackson National, Jefferson National, Pacific Life, The Hartford, and more.

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.

Once a client invests with TPFG are they “locked in” for any specific period of time?

No, however we do recommend an investment horizon of at least 3-5 years.

What is a benchmark?

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.