Since our founding, and to this day, equity securities in client accounts are managed by independent, professional investment advisors with complementary investment styles. This open architecture approach, which we helped pioneer, assures that our clients’ needs are met by the best investment management solutions and not compromised by proprietary investment products. Broadly speaking, our investment and asset management approach is as follows:
- Equity management is provided by outside investment management firms, which are consistently reviewed and monitored by Houston Trust Company.
- Low-cost, passive index strategies are utilized when appropriate.
- Fixed income is managed in-house with a focus on high credit quality and low transaction costs.
- No proprietary investment products whatsoever are used.
Asset allocation and tax considerations are the foundations on which any investment portfolio must be built. We seek to optimize after-tax returns, and we construct portfolios with a keen awareness of tax implications. Our portfolio strategy is based on the following approaches:
- A large allocation to high quality equities is most appropriate for our many client accounts that have long time horizons and modest distribution needs.
- An equity portfolio with low turnover and low costs is historically the best strategy to optimize long-term, after-tax returns and maintain principal and purchasing power.
- The avoidance of many of the products and services aggressively marketed by the financial services industry is a critical element in achieving the preservation of capital and the long-term compounding of a portfolio.
In regards to private and alternative investments, we believe these are only appropriate for very long-term, large accounts with modest distribution requirements. Because our focus is on tax-efficient compounding, we prefer private equity over hedge fund strategies. Finally, we invest directly with people we know, as opposed to institutionally marketed investments and “funds of funds.” Client portfolios are invested in a manner very similar, if not identical, to Houston Trust Company’s own capital.