Where to Get Yield in Today’s Environment
In Part Two of our interview with Craig Van Hulzen, manager of the Iron Horse Fund (IRHAX), he discusses his firm’s separately managed accounts, and how he’s getting yield for his clients these days.
Kate Stalter: Craig, you had referenced the separately managed accounts. I also wanted to talk about that. Maybe just give us the 30,000-foot view of the investment process in that area.
Craig Van Hulzen: In a separately managed account format, most of the clients and families, and small institutions that we work with, we managed predominately all or all of somebody’s assets.
So in that format, we really take people through a three-step process, where we start with a risk budget or a risk allocation that’s proper and appropriate to that family or that mandate, and establish that investment policy.
Then we take them through the asset class allocation of how to currently weight that risk budget, so we’re essentially allocating what we call risk capital across opportunities of various asset classes. And then the final step is the actual security selection itself: What holdings to actually own within that asset class.
At the asset class level, we look historically at the current valuation of, say, for example, US stocks relative to its historic highs and lows, and then compare not only where the US stocks are relative to its own range, but then compare them to other stock or growth asset class options—small-cap US, developed international, emerging markets, and so on.