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Passive, Ubiquitous, Limber, Separate, and Efficient (PULSE)

Tactics to Capture Beta

VIEW WHITE PAPER (PDF)

SUMMARY

When constructing a portfolio, Abbot Downing follows a core-satellite approach. While the “satellite” portion tends to be a smaller percentage of the portfolio and carries higher risk while pursuing alpha returns, core holdings tend to be passive investments used to capture beta. Our approach to passive investing goes beyond replicating an index to also include flexibility, personal preferences, and net real results over the long term, especially for taxable investors.

This white paper explores the five attributes we focus on to deliver enhanced results within our core investment process. We feel core portfolio investments should be Passive, Ubiquitous, Limber, Separate, and Efficient—or PULSE for short. While much of this portfolio theory has previously only been used in conjunction with institutional investors, our PULSE process makes it available for the ultra-high-net-worth client who can benefit from our methods to capture beta and improve returns.

KEY TAKEAWAYS

  • A core passive investment process built around replicating an index and keeping transaction costs to a minimum can deliver long term success to the investor.
  • The ubiquitous core should have broad representation across multiple global asset classes, including the central stock/bond allocation and domestic and global investments.
  • A limber position will allow enhancements—if the investor chooses—such as tactical tilts to reflect preferences or market factors, screens that can shield away unwanted elements, and overlays to capture upside while protecting against downside events.
  • Having a separate account filled with individual securities that replicate the preferred index or broad custom benchmark offers many quantifiable rewards over off-the-shelf products.
  • An efficient core will result in lower costs and broad exposure that is easily tracked, analyzed, and repositioned.

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