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HORAN Capital Advisors’ Approach toInstitutional Asset Management

Todd Poellein, CFASenior Portfolio Manager

Todd Poellein is responsible for meeting the investment and planning needs of HORAN Capital Advisors’ respective clientele. He has extensive experience in individual and institutional investment management. Todd’s experience

with families, defined benefit plans, foundations and endowments complements HCA’s portfolio management team.

When evaluating the investment management industry, many separate the approach between institutional investors and individual investors. Differences may include time horizon, tax status, cash-flow needs, regulatory oversight

and the ability to add principal. Institutional investment portfolios typically have (but not always) a long-term time horizon often spanning multiple generations. For individuals, their life expectancy is generally the end point, although creating a legacy for future generations can also be a goal.

Both institutional and individual portfolios desire cash flow for a specific purpose. Individuals seek to fund lifestyle goals and tend to have more tax sensitivity. Institutions often have specific liabilities to fund such as pension payments or a desired spending rate.

Individuals generally oversee their own affairs while hiring an investment advisor to make recommendations and implement an investment strategy. Institutions generally have investment committees that assist in overseeing investment managers. The committee members provide governance, embrace fiduciary responsibility and act in a prudent manner.

There are many similarities in the process for institutional and individual investment accounts. Our approach to institutional investment management is grounded in a defined, repeatable process.

The following steps illustrate the process we use to manage institutional client assets.

STEP 1: Assess the Organization—The first step is to understand the organization’s goals and needs. We review, and potentially amend, Investment Policy Statements (IPS) in order to clearly define the objectives and responsibilities of the investment assets we oversee.

STEP 2 AND STEP 3: Identify Spending Rate/Liabilities & Align with Long-Term Expected Market Returns—A well-constructed IPS identifies the target rate of return for the investment assets. This return is a function of the spending needs of the organization and guides us in constructing the portfolio allocation with investments that will meet the expected return.

STEP 4: Select Strategic & Tactical Investment Allocations—Building the investment portfolio may require both long-term and short-term allocation strategies. The strategic allocation sets long-term targets for differing asset classes (equities, fixed income, alternatives) based on the expected return of certain asset classes. A tactical allocation incorporates ranges around those asset classes and enables investment managers to take advantage of short-term factors based on existing economic and market conditions.

STEP 5: Create Investment Diversification—Diversification is a process investors use to spread risk. Investments have different return prospects and different risk characteristics. Diversifying the portfolio not only balances levels of risk but also provides different return streams and uncorrelated investment returns. Curbing volatility through specific investments or strategies can lead to better compounded returns.

STEP 6: Monitor and Report to Committee—While working with our clients, we believe it is important to meet with investment committees on a regular basis. This enables us to report results and detail changes in the investment landscape that may impact the portfolio. Additionally, committee meetings include a review of the IPS and current liability stream of the organization.

We invest in technology that enables us to report account performance on a daily basis. Our technology allows online client access to review asset allocations, investment transactions and risk characteristics of the investment portfolio. This enhancement is custodian agnostic, allowing us to coordinate investment reporting with nearly any preferred custodian.

We recognize the importance of the institutional investment accounts we serve and work collectively with organizations to build customized portfolios that address the institutions’ needs. We also coordinate with investment committees to properly outline the IPS, spending rate and target portfolio allocations.

There are many similarities in the process for institutional and individual investment accounts.

Our approach to institutional investment management is grounded in a defined, repeatable process.

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