Our Investment Strategy
Covenant Trust Company® maintains a generally conservative, disciplined and balanced investment approach.
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Our investment approach is strategic rather than tactical: Our strategies are designed to be successful over time periods sufficient to encompass various market conditions. For most of our clients, investment time horizon is measured in terms of years, not weeks or months.
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Asset allocation is the framework of our investment approach: Asset allocations are set initially and maintained long-term, usually with only gradual adjustments over time. We do not shift our allocation targets based on short-term movements in markets. We do not attempt to time the markets or pick stocks.
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Rebalancing is a core feature of our investment process: This is an important means of controlling the overall risk profile of portfolios; it also enables the capture of additional return by essentially “buying low and selling high.”
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Diversification is a top priority: Our core mutual funds are highly diversified in terms of distribution over market segments, industries and individual securities issuers.
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We maintain rigorous asset quality standards: The same asset quality standards that have been in place up to this time remain in place for all our core holdings, resulting in high quality portfolios.
The investment management function at Covenant Trust Company is divided into three major components:
Covenant Trust Company uses data from several outside sources in evaluating individual securities and mutual fund holdings. We also maintain consulting relationships—formal and informal—in order to add depth to the research process. The portfolio management process is coordinated by Covenant Trust Company staff under the oversight of the Investment Committee of the Board of Directors. Responsibility for securities trading is shared by the staff of the departments of Investments and Operations.
All accounts are evaluated internally on many occasions following the initial review. They are examined individually on a periodic basis by the portfolio management and administrative staffs, as well as by the Covenant Trust Company Investment Committee as required by the Illinois Department of Financial and Professional Regulation, Division of Banking. Holdings are monitored on a consolidated basis as well as within individual accounts. Core holdings are reviewed quarterly by the Investment Committee.
The majority of accounts managed by Covenant Trust Company are concentrated in core holdings. A major benefit that results is that these portfolios can be maintained and periodically rebalanced with precision and relative ease. Accounts that are not concentrated in core holdings due to various constraints undergo separate individual review and repositioning where permitted, in order to be moved toward the configuration of core portfolios.
Systems currently in place provide for close monitoring of fund inflows or outflows that may indicate a need for adjustment within an individual portfolio; e.g. increasing cash reserves, positioning newly available cash, or adjusting the account classification or asset allocation targets due to a change in the client’s situation.
Significant resources are focused in the area of investment management. In addition, Covenant Trust Company makes every effort to integrate the investment management process with the other areas of trust management and legacy planning in order to provide a comprehensive package of services to its clients. Please feel free to contact us if you have questions.
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