Cornerstone Capital Advisors

Cornerstone Capital Advisors employs a rigorous fiduciary investment process. We call this four-step process the Cornerstone Advisory Process (CAP). CAP provides structure, discipline and accountability to the management of your portfolio, ensuring we fulfill our obligation to deliver prudent investment advice on an ongoing basis with outstanding personal service.

We credit the CAP discipline with helping our firm grow to more than $225 million in assets under management for families and affluent individuals, and $100 million of assets under advisement for 401(k) plan trustees and not-for-profit institutions. Our investment process is explained below.

Step 1 – Organize: We collect and organize information about all of the investments in your current portfolio. This is done by listing all the investments you own, their location, and values on a single page.

Then, we analyze your portfolio, seeking answers to these key questions:

How much is invested in stocks versus bonds and cash?
What is the standard deviation (volatility) of each investment?
What are the three- and five-year returns and standard deviation of your total portfolio?
How much does each investment cost you annually—including commissions, management fees and other expenses?
What is the asset class and investment style of each investment you own?

Next, we design a computer model to simulate the returns you could reasonably expect from your portfolio over the next five years. We base return estimates on our own research and research provided by leading financial institutions.

Step 2 – Align: We determine the time horizons for each of your investment goals and for your portfolio, we define appropriate asset classes and your level of risk. This aligns your portfolio with your financial goals.

In this step, we consider why you are investing your money. Is it for your retirement, or to fund a grandchild’s education? Are you investing to purchase a second home? The answers will determine the length of time you are invested, and the level of risk you should assume. Where you are invested is also important. Some investments are better held in taxable accounts and others in tax-deferred accounts. We align the attributes of your portfolio with the goals you have, and aim at a rate of return that will help you achieve those goals. Along the way, we’ll help you deal with market risk, sensitivity to changes in interest rates, economic ups and downs, and the correlation of different types of investments, such as domestic stocks, foreign stocks and bonds, and domestic bonds. As these factors that affect your portfolio change, we will periodically realign the investments in your portfolio to account for them.

Step 3 – Implement: This step includes identifying specific investment options for your portfolio, the sale of existing investment positions, and the purchase of appropriate investments to place your portfolio in the position developed in Step 2. Any funds you hold in a 401(k) plan are a part of this step, and the funds available to you will be carefully examined.

We utilize a due diligence process for each individual investment that examines 8 different factors or portfolio characteristics. These include:

Minimum Track Record
Assets Under Management
Correlation to Style or Peer Group
Expense Ratio
Performance Relative to Assumed Risk
Performance Relative to a Peer Group
Stability of the Organization
Holding Consistent with Style

Once the specific investment options are all selected and the tax implications are considered, we implement the changes to your portfolio. You would now have a portfolio fully invested in alignment with your goals.

Step 4 – Monitor: Ongoing monitoring is as important as your original implementation. Using appropriate benchmarks, we measure each investment for risk, return and overall performance, as well as any fundamental changes in each investment.

Each quarter, we compare your investments to their benchmarks and peers. For example, an investment in a small-company growth fund is compared to the performance of the Russell 2000 Index, and also to the average performance of other small-company growth funds that we track. We also review any fundamental changes in each investment position, such as the resignation of a portfolio manager or a drift in a fund’s investment strategy.

Our firm is committed to a long-term, buy-and-hold investment strategy. However, poor short-term performance, or a fundamental shift in the fund’s management or strategy, sometimes requires decisive action and change. When a change is made, we replace an investment only after repeating stages two and three of our investment process.

We also monitor each investment’s role in your portfolio, and assess the tax consequences of selling a particular holding.