02.17.2012
By Terry Flanagan

A Blended Portfolio

Private buy-sider bucks investment trends by not singling out any strategy.

For one-year-old Florida-based Alhambra Investment Partners, trading this volatile market is about market timing.

“From a tactical, risk management perspective, our strategy is more about market timing,” said Chief Executive Joseph Calhoun. “We don’t hedge as much as you’d think.”

A primarily non-hedging risk management technique may come surprising as the firm’s chief investment officer, Douglas Terry, is an ex-floor trader of the COMEX, NYMEX, CBOT and CBOE.

In markets as volatile as they’ve been in recent months, Calhoun told Markets Media that strategic and tactical moves need to be centered on the macro indicators.

“We think about the macro and use macro indicators—everything from jobless claims to ISM (Institute for Supply Management) surveys, but we are not a black box. We have rules-bases portfolios—one domestic, one international—that use trend following. But, technical analysis and trend following is just a part of what we do,” he said.

Another result of on-going market volatility might be wary investors. A sense of wariness regarding staying fully invested in uncertain markets, and paying fees accordingly for active managers.

“We do two things here. We run passive portfolios, using techniques of modern portfolio theory, and we employ a tactical approach to modify those initial strategies. We think using both active and passive methods together will produce a better portfolio in the long-run,” according to Calhoun, noting that cash is key in shaky times.

“We came into the year quite positive versus most of the street, but markets have moved up quicker than we expected,” Calhoun said. “Even though we came into 2012 fully invested, we’ve since then raised cash levels.”

For now, the firm is positive on the U.S. economy, but worries that such positivity is not here to stay.

“Our recovery is driven by monetary policy, not fundamental fiscal changes. There have been brief rallies here and there but long-term, change is not lasting. We think that the second half of the year will be negative due to politics and the election,” Calhoun told Markets Media.

Alhambra Investment Partners currently manages $30 million under management, with $150 million in the pipeline. The firm is an extension of 1997-2006 Calhoun’s ground-up shop, which bears the same name. For Calhoun, sound investment management is about bucking, not just investment trends, but Wall Street trends.

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