Synergy Financial Management, LLC provides advisors with a number of different portfolio choices for their investors with varying temperaments. Whether your clients are conservative or aggressive investors, or fit somewhere in between, Synergy has portfolios that precisely match every preferred style of risk and return.
As you’ll see, our choice of the word “precisely” isn’t casual. We are very deliberate in our portfolio construction and have a rigorous process for developing our models, analyzing investments, constructing defined-performance portfolios, monitoring results, and making adjustments as changing circumstances require.
Synergy Financial Management acts as your investment strategist, or Chief Investment Officer (CIO). Our experienced investment team applies independent research and analysis to develop each model portfolio and keep it on track with its established goals. We support advisors with client-approved commentaries on our investment team’s strategy and approach to the markets. Our stock, asset allocation, bond, and private investment fund strategies are designed to serve a full range of investors.
A sailor cannot control the ocean, but he can control himself. He studies currents and weather patterns. He learns safe sailing techniques and gains experience. He knows when to sail and when to stay in the harbor. A successful sailor uses his intelligence.
We offer two stock strategies. One is a focused dividend income portfolio, and the other is a focused growth portfolio. Although they are uniquely different, our two strategies share a few market similarities. In general, stock markets go up when inflation is low, interest rates are going down and/or are low, and when corporate earnings are going up and or/are strong. The opposite is also true. Moreover, the relationship between supply and demand for an asset is also a major contributor to the trend of the asset.
Our strategies go in and out of favor with the overall market and economic cycles; however, since we are acutely aware of these relationships, we continually and dynamically optimize and adjust our strategies to keep them on track. We do not follow a set-it-and-forget-it philosophy.
Focused Dividend Income Portfolio
This strategy is ideally suited for buy-and-hold investors. This strategy contains well-established companies that pay a dividend and may be close to their intrinsic value, or are fully valued. The risk and return expectations are in line with the S&P 500 Index, however, over full market cycles, the dividend yield is expected to outperform the index.
Focused Growth Portfolio
This strategy seeks to identify alpha opportunities through event-driven, opportunistic and/or intrinsic value principles and blends bottom-up research with top-down considerations. It looks for companies which have had strong historical performance and continue to have prospects for sustainable performance (momentum) in several key value drivers, i.e., return on invested capital, growth, cash flows, and valuations. In addition to fundamental analysis, technical analysis is used to help identify price momentum as well as aid in execution decisions.
At any given time, the active equity strategy may contain stocks in various sectors or it may contain concentrated sector allocations as well as various or concentrated market capitalizations. For small-cap companies, we seek a discount from intrinsic value that is larger than the discount for mid-cap companies, and for the mid-cap category we require a higher discount than the large-cap companies.
We have several sell disciplines to aid in the exit strategy of positions, some of which are soft rules and others which are hard rules. The following are some reasons we may want to exit a securities’ position:
The explicit purpose of our five tugboat portfolios is to limit risk. In essence, the Tugboat portfolios are structured on asset allocation principles designed to protect against risk, are dynamically monitored to assure constant fidelity to their assigned risk limitations, and tactically adjusted as needed to stay on target with our clients’ expectations. Clients are assured that their portfolio never exceeds the amount of risk they select.
When constructing these tactical asset allocation portfolios, an optimal number of asset classes are selected. Academic studies have determined that optimal portfolio diversification can be attained with as few as eight asset classes. We then graph the risk and return values of these asset classes on an efficient frontier chart to determine the most appropriate asset classes for achieving the five different risk levels of our five Tugboat portfolios.
Each Tugboat portfolio is associated with a specific percentage of risk; our clients can select the level of risk with which they are comfortable. Here are the classifications of the five levels of risk:
Synergy takes three distinctly different approaches to constructing better asset allocation portfolios. The Tugboats and Speedboats are built on tactical and strategic asset allocation principles. The Sailboats are 100% tactical.
The Tugboats and Speedboats follow a 5-step process and plot on an efficient frontier:
Unlike the Tugboat portfolios which are risk-averse, these portfolios are designed to capture higher returns without the restraint of risk concerns. It’s important to note that these five Speedboat portfolios, like the five Tugboat portfolios, are also asset allocation portfolios, and, in a sense, is the other side of the asset allocation coin.
When constructing these tactical asset allocation portfolios, just as with the Tugboat portfolios, an optimal number of asset classes are selected. This time, however, the asset classes are selected for high returns. The risk and return values of these asset classes are graphed on an efficient frontier chart to determine the most appropriate asset classes for achieving the desired target of high returns. The Speedboat portfolios are tactically dynamic on a quarterly basis, which means their performance is monitored regularly, but analyzed for potential adjustment only every three months.
Here is the range of investment styles for our Speedboat portfolios:
These portfolios are built on what we call Focused Tactical Allocation (FTA). FTA is a form of what many managers call tactical portfolio management.
As with our other portfolios, there are five risk classifications:
The FTA method is designed to take advantage of shifting market conditions by increasing the level of investment in asset classes that are expected to outperform, or, as appropriate, in investments we have identified are likely to reduce the portfolio’s risk. The FTA model is tactically responsive to immediate market movements and trends.
Synergy Focused Tactical Allocation (FTA) portfolios are designed to outperform the U.S. equity and bond markets in all environments, whether advancing or declining, and they are built uniquely different than most of the models you’ll find on Wall Street. Our portfolios do not try to predict the market’s outcomes, nor are they based on the opinions of analysts. Instead, our FTA portfolios are built on an innovative mathematical blend of technical and fundamental facts, and are constantly monitored.
Moreover, our FTA models do not require the markets to be efficient or for investors to be rational. In fact, we use this to our advantage and it is one of the reasons we do not require our models to remain fully invested during bear markets, sometimes choosing, as circumstances merit, to wait in safe cash investments until market indicators change.
The exact science behind our FTA models is an intellectual property trade secret; however, we can tell you that the essence of our system predicates on measurements that reveal inconsistencies in the continuous tug-of-war between supply and demand imbalances. In addition to supply and demand, we use a weighted blend of specific fundamental factors/facts to guide our portfolio construction.
Our unique fusion of factors/facts helps us take advantage of current market trends and significantly increases the probability of being on the right side of the trade. Although there is no guarantee that the current factors/facts will lead to success, our experience with trading the trends supported by momentum and volume and performing within selected cycle indicators have repeatedly won the satisfaction of our clients.
The FTA models seek performance persistency based on the acknowledged fact that the strength or weakness of a trend is more likely to continue than reverse. Researchers have labeled this phenomenon as momentum, and have documented its widespread existence in the markets over a span of many decades. Momentum can be found in both bull and bear markets. For example, in the stock market, higher performance has been shown more likely to continue at any given time than to reverse. The same is true for low performance as it, too, has been proven more likely to continue at any given time than reverse.
Regardless of the market’s direction, our FTA models are positioned to take advantage of the factors/facts present in the market. We make no attempt to predict changes in the market; instead, our process relies on the rigorous and continuous measurement of actual performance.
We implement our focused tactical portfolios by selecting high-performing candidates from our deeply researched and continuously updated universe of electronically traded funds (ETFs). Each day, hundreds of calculations are done to support our tactical portfolio research so we can identify which asset classes have emerged as leaders, or are showing signs of falling from favor.
Momentum, relative strength, rate-of-change, nearness-to-52-week-highs, and other measurements of performance characteristics are all combined to produce rankings of portfolio candidates. Moreover, we examine these factors with a multitude of technical studies and charts. The following are only a few of the indicators we use daily:
Some investment managers prefer to use just one technique, but this method is very limiting, like applying a hammer to do every task, including those requiring a screwdriver. To achieve the best results, an investor must use the right tool for the job, and this is why we take a 360-degree perspective before we trade, looking at many factors through the lens of a wide variety of technical tools.
With our FTA portfolios, in which we are always seeking the “best of the best” securities, high-performers are selected and low-performers are discarded using a multifactor ranking algorithm, and this process is repeated regularly at monthly, quarterly, or even weekly intervals. Most importantly, the process is repeated every time one of our technical alarms alerts us. This process of continuous self-renewal is intended to capture the benefits of long-term winners, without being weighed down by the unnecessary inclusion of underperformers.
Combining trend identification with advanced portfolio construction gives us a simple yet complete strategy, and provides clear guidance on when to be defensive and when to be aggressive. Our clients achieve their financial objectives by staying on track with portfolios designed to minimize risk and maximize compounding wealth.
Our focused bond portfolio seeks the highest risk-adjusted returns available from a universe of global bonds. This strategy is built on a thorough analysis of a variety of factors including economic analysis, general trends in fixed income markets, yield curve analysis, credit analysis, spread analysis, risk adjusted returns, quality, sector analysis, and total return projections. We seek companies which have had strong historical performance and continue to have prospects for sustainable performance.
At any given time, the active bond strategy may contain bonds in various sectors, such as Government, Municipal, Corporate, Agency Mortgaged-Backed, Non-Agency Mortgage, Cash and Equivalents, and others, or it may contain concentrated sector allocations as well as various or concentrated industries. The quality of the portfolio strives to be investment grade.