Overlay Port. Mgt

What is Overlay Portfolio Management?

At Peak Trust Company, one option we use to manage your portfolio is an investment approach called “overlay” or Unified Managed Account (UMA). Overlay lets us implement the world’s best investment ideas in a highly customized and tax-sensitive manner.

Below, you will find a few benefits of overlay and why this approach is better for you than others you may have seen or used.

  1. Holistic portfolio management. All of your investments are managed in one account, and we look at the effect of every trade on your portfolio as a whole.
  2. Superior tax management. The UMA program allows us to carefully consider the tax implications of every trade, all while maintaining your risk characteristics and preferences.
  3. Customization. The UMA program allows for superior customization, such as security restrictions and adherence to a tax budget, and can limit portfolio turnover. We can incorporate your legacy holdings or provide Socially Responsible Investment options, such as never buying tobacco, defense or polluters, all while utilizing the best money managers.
  4. It allows access to managers normally available only to institutional investors, but at lower minimums.
  5. Quickly adjusting to market conditions. With the UMA platform, tax management and customization don’t slow us down. We are able to change asset allocation or preferred specialists quickly, as changing market conditions warrant.

Here’s how it works:

  1. Based on your goals and circumstances, an asset-allocation plan is developed for your portfolio (e.g. 30% U.S. Large-Cap Equity, 10% US Small-Cap Equity, etc.)
  2. Using a disciplined, data-driven process, we select the best equity-asset managers within each asset allocation category. The selected asset managers are specialists in their strategies and disciplines.
  3. Each specialist gives us their intellectual capital by providing us with the combination of securities that they recommend in their asset class if they were investing from cash today.
  4. We combine these specialist models according to your asset-allocation plan to create an ideal portfolio. This can be achieved starting with all cash or by using a transition plan from your current portfolio.
  5. Every day, your portfolio is analyzed to determine if trading will improve your strategy and bring your portfolio closer to its target, bring it back in compliance with constraints, generate tax losses, etc. Trading will occur if the opportunity for improvement is large enough.

Because we evaluate the portfolio in its entirety, we can optimize the tradeoff between risk, taxes and customization. This is particularly important when considering legacy assets. For example, if you own significant holdings in Exxon, or you even work for an oil company, we can compensate by limiting the purchase of other energy-sector stocks.   The result is an ability to customize and tax-manage while keeping your portfolio on track from a risk perspective.

Contact Peak Trust Company today for a demo of how overlay management could help address your investment-management needs.