As investors build wealth and move to their golden years of needing income and security, there is no better way of doing so than our private fixed-income portfolios. These portfolios are tailored and built specifically to our client needs. Unlike bond mutual funds where investors are pooled together (you have pricing disadvantages, low yield to maturities, hidden fees, no transparency, or control), our private bond portfolios allow investors to access the best bonds available with the highest yield.
Tailored Portfolio Construction
Unlike most of the investment industry, Linden Thomas & Company builds each portfolio through individual stocks and bonds tailored to their specific needs. Our active onboarding process begins with a needs, risk, and planning review. Once your goals and needs are understood, we work with each investor directly to determine the appropriate allocation and construct the portfolio from the ground up.
Benefits of tailored portfolio construction:
Owning the bonds directly gives investors 100% of the income, which increases the reinvestment into more bonds, producing higher compounding results.
Direct ownership, diversified in different industries, helps protect investors from under performing sectors.
A yield-focused bond portfolio offsets equities when equities fall out of favor.
Income reinvested creates more compounding.
The more cash flow you have, the more you buy. The more you buy, the more cash flow you have.
Owning the bonds directly gives you total control and transparency of holdings, income, and progress.
Upon retirement, you have the benefit of using your cash flow which is not shared. You gain 100% of the cash flow.
High income means you rely less on equity results to live on. The equities become your inflationary growth.
The challenge of pooled bond funds is the lack of control and ownership of cash flows.
When investors pull out quickly, it forces fund managers to dump bonds at low bids. The opposite happens when an investor buys into a bond fund portfolio where many of the bonds are valued at premiums with low yields. This is commonly known as pricing disadvantages.
Recipe for Results
With over 30 years of managing private portfolios for high net worth individuals, founder Stephen L. Thomas and his team of professionals have identified six key contributing factors, or ingredients, to maximize client results.
Six contributing factors to maximize client results are:
Investing in equities, whether through our Earnings-Focused Indexes (EFI) or tailored portfolios, proves earnings quality does matter. This helps deliver better results over full market cycles.
Maximizing client yield through our private fixed-income portfolios helps increase total return results and lowers income needs or drawdowns of equity portfolios. This gives investors the benefit of less risk, increased reinvesting of equity growth, and reliable cash flow.
Our strategic allocations combine Earnings-Focused Equities and our Yield-Focused Private Fixed Income portfolios (which includes our research and technology team). These strategies allow our clients to build portfolios that not only increase up capture results but also focus on managing risk in down markets and shorten long periods of recovery.
Unlike pooled mutual funds, the Linden Thomas & Company Earnings-Focused Indexes, and our private bond portfolios and active managers, are all managed directly for each of our private clients. This mitigates the challenge of hidden costs, lack of transparency, and small investor behavior.
Each portfolio consists of individual securities (both equities and bonds), that gives each of our clients the ability to have insight into realized gains, yield, and losses in each security. This provides them with the ability to consider and minimize harvesting before year-end. Security transparency is also a tool that CPAs can leverage to the benefit of the client's individual needs.
Most investors who own mutual funds never get insight into the pricing disadvantages of mutual funds with pre-existing holdings. These are securities that may have been cheap when bought into a mutual fund, but no longer represent investor value. Premium security pricing in bond funds is especially bad because yield and yield-to-maturity can be significantly reduced. The other impact is cost.
Both trading costs and activity of small investors moving in and out of mutual funds increase the trading's total cost. Through the Linden Thomas & Company tailored portfolio, the disadvantage of pricing impact is minimized because securities are purchased when our clients' portfolios are built. Each security is purchased and placed in private portfolios, which eliminates the cost of small investor herding. This allows our team to purchase fixed-income investments that maximize net yield to each investor while minimizing the impact of premium pricing.
The Linden Thomas & Company discipline is to build academically sound portfolios. After 30-plus years of building portfolios for high net worth individuals, results have shown us that earnings quality, investor ownership, and minimizing costs have proven to deliver quality results.
Each portfolio is built on sound academics:
Quality – equity earnings quality
Each equity portfolio is built with a focus on diversification and earnings quality. This provides long-term growth and enhances down-market recovery.
Through our private fixed-income portfolios, each portfolio is built with a focus on maximizing the need for client cash flow. By doing so, you increase long-term compounding and decrease the need to draw down principal.
Through individual ownership of individual stocks and bonds, you avoid the hidden costs of mutual funds and pricing disadvantages that hurt results.
Because Linden Thomas & Company manages assets directly for each client, we take away the high cost of advisors, hidden fees, and pricing disadvantages of pooled investment products.
Does Yield Matter?
One of the biggest disadvantages of fixed-income mutual funds is the pooling of investors along with pricing disadvantages of individual securities. This can heavily impact both investor yields and total return results.
Through the Linden Thomas & Company Private Separately Managed Account Portfolio discipline, we build each portfolio with a focus on maximizing each investor’s yield results. Each portfolio security (whether corporate, municipal, or government bond) is purchased based on maximizing both yield and upside security total return results over the lifetime of each investor.
The eight portfolio disciplines are:
Maximizing investor yield
Developing diversity between sectors
Creating consistent cash flow
Achieving personal tax consideration
Increasing total return results
Minimizing need for equity drawdown
Minimizing total cost to investors
Unlike bond ETFs or mutual funds, which aren't managed individually and offer little benefit because of pooling investors, our fixed-income separately managed accounts are built based on customers' unique needs and are developed to maximize both yield and total return results.