Although we are supported on the operations and research side by the firms and individuals referenced on this website, we make the final investment decisions and trades. We follow the high performers, identifying and tracking holdings of select managers. We select firms where the research is well-funded and unbiased. Ideally, we look for funds led by managers who have personal money invested. When their own skin is in the game, they are more likely to be especially diligent and thoughtful about where they put their money. Once we have identified the hedge funds most closely aligned with our performance goals and investment philosophy, we monitor their holdings on a quarterly basis through mandatory, publicly available 13F filings with the Securities Exchange Commission. We purchase some of the top holdings of the best funds in our managed portfolios.
The Somerville Investments approach to Portfolio Management
The result:
We are able to offer ideas supported by high quality, objective research at substantially lower than hedge fund costs. Traditionally, hedge funds charge a management fee (1-2%) PLUS a performance fee (15-20% of profits). In addition to tracking the holdings of top hedge fund managers, Somerville Investments uses wire house research, newsletters, electronic services and personal contacts developed over 30 years in the investment and planning business.
Accounts are managed individually, which allows for:
- Tax optimization strategies in taxable accounts
- Individual preference in all accounts
What everyone should know, but doesn’t, about Big Name Broker research
Relying on Wall Street firm recommendations comes with an inherent risk, as the banks themselves warn in each research report they publish. This is because of the Wall Street firm recommendations, (also known as sell-side research) may be influenced by the firm’s own internal goal of winning the banking business of the firm’s they cover. It’s an inherent bias based on their business model. Here’s an example from a Merrill Lynch research report:
“Merrill Lynch does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.”
–June 4, 2018 equity research update on Costco Wholesale Corporation
Somerville Investments:
Small in size. Nimble in responsiveness.
It’s a classic case of David and Goliath, in that big and lumbering is not always better. None other than Warren Buffett has stated that outperformance is more difficult with large pools of assets. As he stated in his 2016 Berkshire Hathaway letter to shareholders:
“As for Berkshire, our size precludes a brilliant result. Prospective returns fall as assets increase.”
Somerville Investments manages assets under 100 million. That amount is small by Wall Street standards, so we can move more nimbly than large competitors.
Contact us today to learn more!
What about fee structure?
The Somerville Investments fee structure is simple and based primarily on assets under management. While not the least expensive alternative for those seeking portfolio management and financial planning services, Somerville Investments maintains a reasonable and competitive fee structure while avoiding complicated, expensive packaged products.