We Run a Tight Ship: Paying attention to asset allocation, expenses and taxes

Posted by Realize Rev on 8/4/16 4:00 PM

Revolution Partners strives to construct well-diversified portfolios with a measured approach to investment selection. We believe portfolios with a high number of funds come with additional hazards; for example, it may be challenging for an advisor to effectively monitor each investment on an ongoing basis, and the often accompanying higher turnover in these portfolios typically results in additional trading and tax costs.

If you read our blog, you may have seen our recent article All Will Be Revealed: Is your portfolio too complex and expensive? about why and how we try to curb excessive embedded fees that can wear away at long-term portfolio growth.

"We believe that investors are more likely to meet their financial goals when certain factors that can lead to unnecessary loss are comprehensively managed, such as asset allocation, fees, taxes and other implementation costs."

When deconstructing a portfolio, we look for asset class and security concentration, portfolio gaps, correlation among underlying portfolio holdings, and security overlap to determine if improvements can be made to a client's asset allocation. A portfolio with high security overlap is problematic for a couple of reasons. First, funds that have similar underlying holdings tend to be highly correlated with one another, meaning that they perform similarly across market environments. In contrast, a well-diversified portfolio typically has some holdings that are performing well when others are out of favor to ensure a smoother ride. Another issue with high overlap is that the client ends up paying for several comparable funds instead of holding one fund that effectively achieves the goal.


The portfolio deconstruction analysis we provide our clients addresses these factors by highlighting potential red flags and recommending investment solutions that we believe will help our clients meet their goals more effectively.

Additionally, we carefully consider each client’s tax circumstances when evaluating their existing portfolios and making recommendations. For example, before recommending changes to any non-qualified portfolio, we look at the potential capital gains exposure and/or cost basis of each holding and determine whether the benefit of trading outweighs the cost to the client.

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Revolution Partners believes in objective, conflict-free investment management. When evaluating clients’ existing portfolios, we pay close attention to asset allocation, expenses, and taxes. Properly managing these factors helps avoid unnecessary and unrecoverable capital losses to our clients. Our goal is to find areas of opportunity in a portfolio and recommend solutions that we believe will help clients Realize Life’s Worth™. 

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