This is harder than it looks. When markets are ripping, it seems everyone’s an expert and feeling good about returns. 2019 has proven tricky thus far for portfolio managers and advisors seeking yield and the near future appears tenuous, to put it mildly. When uncertainty creeps into the investor consciousness, there’s a tendency to seek higher ground and preserve capital, but returns have been robust during the extended recovery and there’s an addictive quality that comes with returns.
We sat down with a few Hilton Capital Management team members to discuss the prospect of economic headwinds, how Hilton manages through myriad of market environments and how the firm’s growth hasn’t affected their ability to remain disciplined.
“Were seeing a degradation of certain data points,” explains Alexander Oxenham, co-chief investment officer of Hilton Capital. “We’ve been consistent in our view over the past year or so that the fundamentals of the economy would remain strong throughout most of 2019. Now that we’re nearing the back stretch of the year, we’re watching closely to see if we can detect a confluence of negative indicators that might accelerate us toward recession in 2020.”
See Also: Managing Through Market Volatility
Oxenham is quick to note: “It’s important to keep your head when others are falling off. There’s been so much focus on an impending recession that it can boil over into the markets. There are domestic and geopolitical forces at play, concerns developing throughout Europe, the specter of worsening trade relations with China and then there’s the real, raw, fundamental data the economy produces. The market is susceptible to each and all of these factors in varying degrees. The trick is not to get too high or too sour on one particular aspect and see it as a whole.”
Hilton Capital CEO Craig O’Neill echoes Oxenham, saying: “One of Hilton’s core strengths is our longevity and experience. We have an investment process that Bill (Bill Garvey, founder of Hilton Capital) and Alex have developed and refined over many years, which gives the investment committee a great foundation and makes it easier to spot certain trends. Adding keen minds like Tim Reilly and Tom Maher bring depth and perspective to this investment process."
Katherine Cathcart joined Hilton Capital last year after a lengthy tenure as a portfolio consultant, giving her a fresh perspective on where Hilton fits into an investment strategy.
“I first met Bill about seventeen years ago and loved his take on investing. In my capacity as portfolio consultant, I had actually been recommending Hilton since 2008 because of Bill’s focus on mitigating risk while striving to offer income and capital preservation,” she explains. “I always steered my clients toward strategies that could help create a predictable performance range in their portfolio designs. So for me, Hilton was often a core recommendation to achieve this objective.”
Adding Depth to the Bench
Today Hilton has expanded beyond the core Tactical Income strategy Cathcart is referring to, but the discipline and analysis remain the same when it comes to Hilton’s new offerings. “We operated for more than a decade before considering new strategies,” says O’Neill.
“Proof of concept is imperative in our industry and it requires time, patience and focus,” he adds. “The same attention to detail, in both macro and micro analysis terms, holds firm for every strategy we have launched in recent years.”
Bill created a great road map in terms of design. His approach is simply part of our DNA at this point so it’s fair to say that our confidence as a team stems from our confidence in our process.”
O’Neill praises Garvey’s insistence on process and structure.
“Bill created a great road map in terms of design,” O’Neill says. “His approach is simply part of our DNA at this point so it’s fair to say that our confidence as a team stems from our confidence in our process.”
Hilton Capital president Tim Reilly concurs.
“Each strategy obviously exists for distinct purposes, but the philosophy that undergirds our approach is the same every time. Consistency is critical,” he says, “because whether we’re speaking to institutional investors, private investors or investment advisors, they need to feel comfortable that we have guardrails in place and know how to manage risk with a consistent approach. In the end, they’re each investing in our people and our processes so trust is essential.”
The Devil is in the Details
“By the time a suggestion reaches the investment committee,” interjects Oxenham, “it has gone through a fairly rigorous analysis. Therefore, when you present a thesis, everyone already understands the repercussions, positive or negative, and we can have a productive discussion.”
The Hilton investment committee meets like clockwork to discuss each strategy’s portfolio mix.
“I’ve seen some ideas that are tossed out of hand. The minute you have to overly defend an idea, it’s probably not right for us,” says Oxenham bluntly. “Our process and philosophy are such that we don’t have to take idiosyncratic risks. Moreover, sometimes it’s a case of addition by subtraction so we don’t simply look at new opportunities but we’re constantly evaluating each aspect in the context of top down macro scenarios as well.”
Hilton also maintains a high level of internal transparency ensuring that every member of the team is involved and understands why certain decisions are being made.
“It helps when you’re on the front lines,” explains Andrew Molloy, director of RIA and platform sales. “Whether I’m presenting to a high net worth individual or a team of extremely knowledgeable investment advisors, I’m exceedingly confident in our approach and am able to speak to our macro philosophy, weighted allocations or even more granular aspects of our strategies.”
“Our process and philosophy are such that we don’t have to take idiosyncratic risks. Moreover, sometimes it’s a case of addition by subtraction so we don’t simply look at new opportunities but we’re constantly evaluating each aspect in the context of top down macro scenarios as well.”
“There’s no reason to create artificial barriers between the investment team and the sales team,” agrees Oxenham. “I want them armed with as much knowledge as possible because they’re on the front lines selling and defending our strategy. And our clientele is sophisticated so they ask difficult questions and deserve detailed answers.”
For more Hilton Capital fact sheets or to listen to our most recent quarterly investment call go to: https://info.hiltoncapitalmanagement.com/resources