Investment Management Approach
Investment management is the core of what we do at Berkeley Capital Management. Our approach is shaped by a philosophy grounded in fundamentals, discipline, and long-term thinking.
But investment management does not exist in isolation. It is most effective when it works hand in hand with financial planning.
How Investment Management and Financial Planning Work Together
Financial planning is a process built around understanding your values, your goals, and your needs. The planning process helps define what those mean in practical terms. A good advisor helps clients understand what they need for the things that matter most to them, analyze their current situation, and quantify what needs to happen for those priorities to become reality. That includes the rate of return required, the dollars needed at specific points in time, and how a portfolio may need to evolve through different stages of life. It is, in many ways, a roadmap for decision-making. Investment management is the execution of that plan.
The integration of financial planning and investment management is the key to a well-built portfolio. The planning process is all about where you are today and where you want to go; the investment management capability is the way you get there.
Without that connection, even a well-built plan can fall short.
Berkeley’s Philosophy on Investment Management
Berkeley’s investment management philosophy is focused on the long term. While a lot of market commentary is focused on guessing what may happen in the short term, we focus on fundamentals. We evaluate businesses based on their revenues, profits, assets and liabilities, and cash flows. We think about the credit quality of bonds, including capacity to pay, along with collateral.
At our core, we believe investors should understand what they own, have a reasonable expectation of what the future may hold, and have a clear sense of what constitutes a fair price for an investment. We appreciate quality businesses that generate high returns on invested capital and have quality management teams, low debt levels, and decent growth prospects.
Thinking about the fundamental value of an investment is the cornerstone of our approach. As Warren Buffett said, “Price is what you pay. Value is what you get.”
Asset Allocation That Reflects Risk and Return
Investing ultimately comes down to deciding when, where, and how much risk to take.
At times, investors are well compensated for taking risk. At other times, it is more prudent to be conservative. Markets are constantly changing, and no one can predict the future with certainty.
Many firms use cookie-cutter portfolios that don’t change even if the market environment evolves. We take a different approach. We evaluate whether the fundamentals of an investment suggest that the potential return justifies the level of risk being taken.
This is not about trying to time markets. It is about understanding whether the tradeoff between risk and return is attractive at a given point in time, and then making thoughtful adjustments when the facts warrant them.
A Fiduciary Approach to Sensible Investing
Sometimes our process leads us to what might be considered boring investments, but we firmly believe our clients are interested in a fiduciary approach and work with us because they want a portfolio built by seasoned professionals. This approach may feel old-fashioned, but it is intentional. We believe sensible investing, applied consistently, is one of the best ways to help clients pursue long-term financial goals.
We are inspired by the great investors that have been tested over time. Our philosophy grows out of the work of legendary investors Warren Buffett, Charlie Munger, and Phil Fisher. It has been shaped by decades of real experience seeing investments produce good or poor returns, learning from both real success and failure. Experience that can only be earned.
Depth in Fixed Income
In addition to decades of equity experience, Berkeley’s founder, Ryan Peschka, managed large bond portfolios and balance sheets as a bank CFO. He has a rare depth of knowledge around high-quality fixed income including Treasuries, mortgage-backed securities, and municipal bonds.
Fixed income investments tend to be more conservative and are often intended to produce regular income with less volatility than stocks. For many retirees and investors approaching retirement, the need to increase their portfolio allocation toward more conservative income-producing investments is one of the biggest shifts they will make in their financial lives.
Understanding a wide range of conservative income producing investments gives Berkeley a critical capability. We can build a portfolio to produce income for retirees. In addition, we can help other more growth-oriented investors build the ballast that can give them more stability than a portfolio only invested in equities provides.
Understanding Our Circle of Competence
We do not try to predict the economy or make broad market calls. While we respond to changing data and prices, we have never seen anyone build a successful track record for accurately making broad economic or market predictions.
Markets are complex, and prices are a byproduct of smart investors buying and selling at what they think are good prices. The result is a fairly efficient market environment. Consistently outperforming the stock market is difficult. While we are always looking for opportunities, we also understand the difficulty, complexity, and reality of the market we operate in.
Staying within that circle of competence allows us to make more informed decisions and avoid unnecessary risk.
Favoring Low-Cost Investments for our Clients
Over the past two decades, there has been a dramatic expansion of good low-cost investment options, like index funds and ETFs. Asset classes and strategies that used to be higher cost niches available only to institutions have become low-cost and easily accessible. Advisors have an enormous array of choices, creating more decisions and more complexity than ever.
Expenses are a detractor from investment performance. That’s simply a fact. However, some areas are less efficient, creating good hunting grounds for active managers that may not be as well suited for passively managed investments. We use our professional judgment to assess when we should use low-cost passive indexes and when we should partner with managers specializing in a certain asset class.
A Consistent, Applied Philosophy
One differentiator is that when using outside funds as part of a portfolio, we only partner with managers who share our philosophical view on investing. A lot of firms seek to build portfolios using a “one of each” process, meaning clients hold a hodgepodge of different philosophies and views. Even worse, a lot of firms try to shift their approach based on reading the tea leaves – or worse yet, CNBC. The result is an inconsistent process that is hard for clients to understand or rely on.
We believe consistency is one of the most important drivers of investment success. The goal is to make sure each investment has a clear purpose and fits within the broader plan.
Experience That Matters
Our team has been tested through several volatile market swings, including the Dot-Com Bust, the Great Financial Crisis, COVID-19, and numerous smaller selloffs. That experience informs how we build portfolios, manage risk, and guide clients through periods of uncertainty. Investment knowledge matters, but so does temperament. Markets will always test investors. A disciplined process helps keep decisions grounded when conditions are uncertain.
The Bottom Line