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In the world of money management, the term “partnership” is often tossed around by vendors that supply products to investors that have merely created transactional relationships. For example, when a wholesaler takes you out to dinner, although nice and appreciated, does dinner deliver on the essential needs of the advisor and create a true partnership?

Many outside managers make the claim that they are a partner with the firms that use their strategies. If true, a partnership should be focus on understanding the needs of the partner firm, as well as how to better service and engage the end client. In the end, a true partner should be an asset to your operations/clients and be an accurate reflection of your business.

What does a partnership mean to Applied Finance? We think it centers around the 3 E’s….

EDUCATE firms about Valuation Driven Investing
EMPOWER them to speak about strategy holdings
ENHANCE client experience

EDUCATE – Applied Finance hosts due-diligence workshops throughout the year to better educate our investors on our Valuation Driven investing process. The more you know the better you can convey the benefits of investing in our strategies to clients and prospects. In addition to the workshops there are several other resources we provide managers such as access to our academic research on the efficacy of Valuation vs. traditional “value” investing. Our process often leads to identifying opportunities in the market that are often missed when evaluating securities using price to some fundamental.

We are consistently informing our investors with market intelligence insights to not only help understand why we are invested in the companies in our strategies but also how those companies might be affected in different market environments. Two examples: 1. leading up to the Tech Bubble, we showed that the market had unrealistically high expectations priced into the market and 2. In 2009 we encouraged investors to get back into the market because it was a generational investment opportunity.

EMPOWER – Our goal as a partner is to empower you to be able to talk about our strategies, investment philosophy, and holdings in a way that positions you as the expert with an unmatched level of preparedness. Because we are a boutique firm, you have a distinct advantage of bringing a strategy to your client that is world class but not necessarily known in the retail space. How do you win more business by investing in the same large name brand firms i.e. Oakmark, Dodge and Cox, DFA, AQR, Research Affiliates that most other advisors are offering? The answer is they can’t, unless they bring something unique and different to the table.

Partnership is in our DNA and we have no aspirations of becoming an investment behemoth. We know that our bread stays buttered if we develop and nurture strong relationships with small groups of investment firms that truly understand what we do and believe in our approach.

ENHANCE – For years managers have provided quarterly write ups that provide little insight into the health of their strategy or information that can be material to share with a client. Because we have a time-tested database going back 25 years, it provides our investors with an enhanced viewpoint on how companies perform in different market cycles. We share that information with our partners! This could be specifically important when transitioning a prospect or addressing a legacy holding. Our team can help you view the company/companies from the same perspective as our analyst when making investment decisions. Our analysts rely on this database to identify companies to invest in, they then stress test the company and publish the valuation model for all constituents in the Valuation 50 strategy. We enhance the client experience through transparency, our investors understand why we are invested in every company in the strategy.

Beyond quarterly write-ups, a research report is written on each company to relay the fundamental reason why we like the holding as well as things we will be looking at that may negatively impact them. This allows you to speak with clients from the individual company level and with portfolio turnover of less than 15%, you will become extremely intimate over time with each of the holdings.

If a short-term issue arises that effects a company not driven by fundamentals and a company makes a large percentage move up or down we issue a write up within forty-eight hours. These updates equip you with bullet points to speak with clients at the ready about the security and our thoughts going forward with the holding. By investing in our strategies, we look at that investment as a partnership, where we are both trying to enhance the end client experience.

Like small grocery stores that take their patrons groceries to their car, we strive to provide a personal touch that larger firms simply can’t achieve. We are not new to this concept, we have established these types of partnerships through our research firm for the past twenty-five years, retaining over 90% of those relationships annually. Using Applied Finance as an outside manager is no different, we don’t look for the “hot money” driven by performance but strive to help our partners explain performance, in good markets environments and bad.

Our team of dedicated professionals have been together seventeen years on average, most are partners in the firm and have a vested interest in viewing our firm and partners as a team. We want you to succeed because that is how we succeed. If you share in our core beliefs and would like to better understand how to benefit from a partnership with Applied Finance, we look forward to hearing from you.