The Case for Covered Calls

Terry Flanagan

New York-based Griffin Asset Management has adopted a three-pronged approach to asset management: covered calls, growth equity, and dividend equity. The firm manages $390 million, 60% of which is high net worth individuals and family offices, and 40% are endowments and foundations.

“Our core expertise is on the equities side, that’s where we do a lot of independent research,” said Doug Famigletti, Griffin’s president and chief investment officer. “We don’t use other funds, and rarely use ETF’s, we buy individual stocks, bonds, preferreds etc.”

Griffin’s covered call strategy involves selling options against equity positions. It was hired as a sub-advisor to run a mutual fund, The KF Griffin Blue Chip & Covered Call Fund, using our covered call strategy. The Fund seeks to achieve its investment objective by investing primarily in dividend-paying, large-capitalization common stocks of domestic and foreign issuers that are traded on a U.S. exchange and by writing covered call options on a substantial portion of the stocks held in its portfolio.

“The covered call strategy is the most active,” Famigletti said. “We’re turning options over two to four times a year. On the common stock side, our turnover is 25-30%. We trade most days and have a full time trader.”

The firm uses two systems internally: Advent AXYS which is a portfolio management system and Advent MOXY, which is for trading. “All of our assets are at held at independent custodians,” said Famigletti. “We have relations with Pershing and Fidelity, and we trade directly through them. We also have client assets at JP Morgan and UBS, and we trade directly through them.”

Advent Software, a provider of software and services for the global investment management industry, announced recently that 7 of the top 10 largest U.S. registered investment advisors (RIAs) are Advent clients.

“We are developing dynamic investment and wealth management solutions that help RIAs continue to grow their businesses,” said Chris Momsen, executive vice president, sales and solutions management at Advent. “The combination of innovative and reliable solutions with the flexibility of deployment options we offer, make Advent one of the only established firms that can provide RIAs with the range of services they need to thrive as they grow.”

In 2006, two firms merged, Griffin Asset Management, LLC and Hovey Youngman, Inc. to form Griffin Asset Management, Inc. “Griffin Asset Management was founded by my father in 1995 and Hovey Youngman was founded in 1976,” said Famigletti. “My father is still involved with the firm. One of the partners from Hovey Young is still involved. I became involved in 2003, prior to that I was an institutional salesman at Goldman Sachs.”

In addition to covered call, Griffin has a growth equity strategy and a dividend equity strategy. “On dividend growth & growth, we have a process for identifying high quality companies, and we also have a quantitative process, looking for companies that generate a lot of cash with strong balance sheets,” said Famigletti. “But we don’t just buy quality; we want to buy quality when it’s out of favor. All of our strategies consist of high quality securities that hold up very well in down markets.”

In addition to asset management, Griffin provides investment advisory and wealth management. “We take our expertise from our various strategies and work closely with clients to customize a portfolio taking unique needs into consideration,” said Famigletti. “We work with individuals and small institutions on asset allocation, and a customized plan to fit their needs and will also actively manage the allocation based on our views. We’re looking to grow. We are starting to market to institutional consultants, and are looking for managers who can join us.”

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