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Unpacking the Tactical Income Strategy


Unpacking the Tactical Income Strategy

Understanding the needs-based thought process that fuels the strategy.

August 10, 2018     4 minute read

The intern program at Hilton Capital is a point of pride for company leadership. Every year, a new crop of youthful faces, eager to learn the inner-workings of the world of finance, fill office cubicles and hustle about. Each intern is invited to participate in a Hilton tradition to pitch the leaders on a company they believe should be included in Hilton’s portfolio. “The research process alone is an invaluable experience,” says Andrew Molloy, Hilton’s Director of Marketing. “We’re always pleasantly surprised at what they bring to the table and some of the suggestions are truly thoughtful and inspiring.”

The task at hand for this capstone project is to identify a company that embodies the “needs-based” philosophy implemented by Bill Garvey at the inception of the strategy. “Needs-based is exactly what it sounds like,” says Co-CIO Alexander Oxenham. “Bill has maintained a deliberate focus on providing consistent returns with minimal risk regardless of fluctuations in the market or the economy. So the equity portion of the portfolio,” continues Oxenham, “consists of companies that produce products or services that cover the most basic and essential needs in our lives. These companies are typically more immune from volatility.”

The Tactical Income Strategy is a blend of fixed income, high-performing needs-based common and preferred equities and stable MLP’s. The investment team is constantly at work tweaking and maneuvering allocations within certain sectors to continually re-balance the equation and optimize performance. The result is a holistic strategy that provides capital appreciation and income with minimal risk. As far as the success of the research interns each year to break through with something unique, Hilton leadership admits that it’s no cakewalk.

“The investment team is constantly at work tweaking and maneuvering allocations within certain sectors to continually re-balance the equation and optimize performance.”

“We run them through the gauntlet,” says Chief Compliance Officer Barbara Martens. “The best part of this process is that the investment team truly considers each intern proposal. It’s meant to be a valuable and real world learning process and every year there are standouts that warrant deep consideration.” Interns are tasked with identifying companies that are not in the portfolio and argue the case for inclusion. “Every year, someone inevitably fights for Procter and Gamble,” laughs Molloy. “What’s interesting, though, is the proposals are taking a generational shift of late. That’s the fascinating part. What’s necessary to the younger generation is a lot different than what we think is necessary. So as data-driven as the investment team’s approach is, we listen closely to what this generation thinks. If nothing else, it inspires great debate and conversation.”

The idea that what is necessary is evolving is a popular topic. “It has become a discussion at the investment policy meeting every week,” says Hilton founder Bill Garvey. “It’s important to remember that our main criteria is companies must first and foremost pay a dividend. There are some terrific companies that are focused purely on growth but have no dividend policy so they’re simply not part of the discussion.” Garvey emphasizes this point strongly. “Style drift is a danger. Technology is ubiquitous so it has a place in the conversation,” continues Garvey. “But we stay focused on our standard deviation from the marketplace. Companies like Crown Castle who run tower cells, Broadridge, Intel - these are technology companies with core competencies that are essential to the backbone of new and established technology.”

Alexander Oxenham, Co-Chief Investment Officer for the Hilton Tactical Strategy echoes Garvey’s sentiments. “Technology is as important as food these days because the world is interconnected. So the tech sector has always had the underlying support in the investment committee. But since every equity needs a yield there’s only a handful that even apply. The fascinating aspect of the discussion,” continues Oxenham, “is how you examine technologies such as Amazon that feel like luxuries but have increasingly become necessities. There’s no question our relationship with technology is changing but we still maintain a disciplined approach to examining every single company. There’s no such thing as following the herd at Hilton.”

Garvey puts a fine point on these sentiments. “Participate. Preserve. Prosper. Our job is to protect our clients’ assets and wealth; provide income and capital appreciation without taking on unnecessary risks.” 

Learn more about the Tactical Income Strategy

Morey Creative and Hilton Capital Management staff (“HCM”) collaborated in the preparation of this article. Morey Creative is a marketing firm engaged by HCM. HCM has reviewed and approved this article for distribution. The information set forth in this article should not be construed as personalized investment advice. There is no guarantee that the views and opinions expressed in this article will come to pass. Investing in the markets involves gains and losses and may not be suitable for all investors. The information set forth in this article should not be considered a solicitation to buy or sell any security.

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