Welcome to the Orion Portfolio Solutions portfolio recipe webinar. This month we're talking about the wealth advisory portfolio. I'm Rusty Vanderman, the chief investment strategist at Orion portfolio solutions. So why are we talking about wealth advisory portfolio this month? And that is because wealth advisory services for high net worth investors are now available on Orion portfolio solutions and we are introducing today's speakers. We have two of the more popular strategists in terms of building wealth advisory portfolios. In terms of equity portfolios, we have Crawford Investment Council Atlanta based been around since 1980 and on the fixed income side, we have Belle Haven out of Rye Brook, NY around since 2002. Before I introduce today's speakers, just a couple housekeeping notes. First of all, a couple hours after this presentation, we will be sending out an e-mail which has a link to this presentation and materials that go along with it. You can ask questions. So in the lower right hand corner, please ask a lot of questions for our speakers today. Today's format will be our traditional format where each speaker will go for 20 minutes and then we'll have 20 minutes for Q&A. And the lower left hand corner, you will find various resources associated with today's. Seminar so introducing today's speakers. So first of all, we have John Crawford, the Managing director of Equity Investments at Crawford Investment Council. He's been with the firm since 1990. And for Belhaven, we have Stan Sadler, the director of Investment solutions. He's been the industry for nearly 15 years, the last 6 plus with bellhaven. Both of these guys have been my podcast. They're both great. They've got a lot of information. It's kind of, it's, it's kind of a shame. I'm only giving them 20 minutes apiece. But guys, I'm giving you 20 minutes. John, you get the ball first. All right, Rusty, thanks a lot. Appreciate being included today. I'll just begin by saying I like the the recipe theme and particularly when Crawford is a a main ingredient, but. I do think there's a lot of similarities between cooking and investing both in compass. Not only art, but also science. And in each case you're looking for a successful outcome. So I believe that the combination you've come up with today, Rusty, will produce a successful outcome for investors. I'm convicted in that because. Crawford's philosophy is actually very similar to this recipe you put together in that we. Focus on income producing portfolios. We emphasize quality and we think mitigating risk is very important and then of course we're managing for total return. So this can really solve for all the clients needs. It's a fairly simple solution that's straightforward. It's not over diversified. And really we believe that high quality bonds are the best diversifier of equity risk, so. Really, I like this solution and I think that from a spendable income standpoint. This combination or this this series of combinations can provide a very attractive level of yield. So with that, I'll introduce you to Crawford. Crawford was founded in 1980. As Rusty said, our firm is characterized by stability and consistency, both in terms of the way we run our business, but also in terms of the way. We managed portfolios. We've been around for 42 years, which puts us in the top 2% of all asset management firms in terms of tenure. And then in terms of our assets, we're in the top decile of all registered investment advisors. So the firm is independent. We're 100% employee owned. We do have a very high level of employee retention. We think that Foster is a very high level of client retention. We focus on dividends. We know yield is very important and quality is a key tenet of our overall philosophy. And so we are somewhat unique and that we use the dividend as our initial indicator of quality. And this quality orientation has led to a lot of stability across the company. Just in terms of the strategy itself, it is 100% equity portfolio. We have a 12 year track record. The strategy has provided more than a 4% yield consistently over the strategies history. We're striving to live at the intersection of yield and quality, which I'll talk more about in just a bit. And the strategies provided very competitive returns while protecting capital in down markets. And as Rusty said, this is available via the Orion Portfolio Solutions platform. So just in terms of the team. The investment. Portfolio is put together by these eight investment professionals. You can see that the seven sector analysts are organized by economic area of focus. This is a well tenured team, very experienced. A high level of collaboration amongst the members. David Gilmour is the yield, the dividend yield portfolio manager. So he leads the strategy. David, along with a number of his other counterparts, have been with the firm for a long time. There's a high level of philosophical buy in and continuity across the entire team. In addition to experience and many of these individuals came to Crawford from other larger organizations and we've been able to attract and retain a really high caliber group that we're extremely proud of. So this is really the horsepower of the organization. We have Tom Dowd's picture in the upper left hand corner. Tom is the the the primary client service contact for Ryan and. He'll be happy to respond to any of your inquiries or requests, should you have them. So the team. As I said, it's philosophically aligned and and our philosophy philosophy on this strategy and overall is simply that. Higher dividend yielding stocks is a really good place to invest. The the line graph on the bottom of the page just shows that the highest. Yielding quintile of stocks has provided far superior returns to. The middle quintile and the lowest yielding quintile. Of of all stocks. And so this is over a significant period of time. And so there's a lot of empirical studies that highlight the merits of investing in high yield stocks and. We we think not only investing in high yield but also marrying this with high quality securities. Can provide not only a high level of income, but also a lower volatility and preservation of capital and declining markets. So the strategy employs a broad sector diversification diversification pattern. And a high quality orientation that helps us mitigate not only market risk but importantly interest rate risk as well. So we're really striving to be at that intersection of. Yield and quality and so we we are somewhat differentiated in that we target an overall level of yield in the 8th to 9th decile of all US dividend paying stocks. Currently that range is. Roughly 3.3 to 5.5%. And we target that iconic decile because. While we can find higher yielding securities up into the 10th decile. What normally accompanies those stocks is a higher level of risk, the possibility of a dividend cut. And increased volatility and so by moving down just a little bit in the on on the yield spectrum, we can give ourselves a higher quality orientation, we can give ourselves much more visibility and predictability in terms of the dividend itself and the safety of the dividend and also produce attractive total returns. So pictorially, this is where we're trying to position the portfolio. And just to set this up, we've got dividend yield on the vertical axis. And risk or volatility on the horizontal axis. And So what you'll observe here is, is that. High quality stocks. Tend to be lower risk because their businesses are more predictable, they're more consistent. But they typically offer lower dividend yields and so. Conversely, with higher yielding stocks. You get more income, but you typically have to accept more risk when you're investing in in in these higher yielding stocks and so where Crawford's trying to. Place this portfolio is right there at the intersection of higher yielding stocks and high quality stocks and so that's where you can provide a yield of roughly 4% of the portfolio level. You can offer your investors below average volatility. And you can balance out yield quality and risk. And so that's the sweet spot for us, right, where quality and yield intersect. So this is a an intense fundamental research process. It's implemented, as I said, by the seven sector analysts and myself. We start with an investment universe of 1100 U.S. companies. There's no other couple 100 ADR American depository receipts. Which are eligible for investment and from that universe the sector analysts do their fundamental bottom up research, which is the. The most intensive part of this process and. The sector analysts are are. Biased towards companies that have a high yield. With growing and sustainable dividends and So what they're looking for are value oriented stocks that are out of favor for one reason or another. Importantly, they have to have a quality bias, which means to us they have a strong balance sheet that consistent earnings growth. And they have high profitability as measured by return on equity and they have strong management teams. So all of these things are criteria we seek to satisfy. In our fundamental process, there's obviously a lot more to it. Traditional balance sheet, income statement, cash flow analysis, interviews with management, meetings with companies face to face, talking to competitors, suppliers, whatever the whatever we need to do to satisfy ourselves and to develop an appropriate investment thesis. And then ultimately we're seeking to build the portfolio of 40 to 50 best ideas from this higher yielding opportunity set. The cell discipline involves. If the thesis no longer becomes valid again, we develop an internal thesis if this becomes a. If this is not materializing, we will move on. If the yield becomes unacceptably low due to price appreciation where the risk reward becomes less favorable, that could cause a sale. The yield moving down is is a little bittersweet because some of our best stocks, when they appreciate the yield comes down. That's a good problem to have, but we have to. Have to say goodbye to him at some point and recycle the idea into into another higher yielding security and then. When a more compelling investment opportunity arises that could lead to a sale as well. So those are the primary reasons we would sell a stock and. I should note that we do opportunistically rebalance the portfolio. Changing the position sizes, taking profits either fully or partially in response to market and individual stock price swings. The portfolio stays fully invested, but within the a fully invested posture will certainly. Change the weightings to reflect the opportunity set. And so just the this is a, this is an example of purchasing what we call quality on sale. And so this is really kind of a recipe within the recipe, if you will. And. And somewhat of the secret sauce on how. Crawford selects higher yielding securities and and. Manages the portfolio, so Johnson Controls is a stock that we followed for a long time. We've admired the management team due to their effective capital allocation policies and shareholder friendly, shareholder friendly. Behavior. And so we bought Johnson Controls in the dividend yield strategy back in 2017. At that time, the stock had a 3% yield. And our thesis was really. Somewhat tied to their sale of the auto battery business and the company becoming more focused on higher margin controls and smart buildings. And so when we bought the stock, as I say, it had about a 3% yield. We held it for a couple years being patient as the thesis materialized, we actually ran into the pandemic and at that time the yield. As the stock price went down significantly, the yield jumped up to 4%. At that time, we increased our position size to 3% weighting and shortly thereafter the stock got its legs under it and started to do a lot better and the stock doubled in a pretty short period of time. At that point, the yield was less than 2% and we elected to sell the stock in favor of BAE Systems, which we bought. At the same time, we sold Johnson Controls and we were able to move from an industrial company. That was an opportunistic value play. Into a defense company that had very stable cash flows, a strong balance sheet, 18 years of consistent dividend growth on top of the share repurchase program. Stock was yielding. 4 plus percent on purchase. And of course we didn't know that a war was going to break out later in in 20, later shortly thereafter. But we did know that there was opportunities for margin improvement. We knew that they had strong incumbency positions and we knew this was a well run enterprise that had very sustainable and consistent cash flows and so. This has turned out to be a good holding for us as well. The yield has. Remain above 3%, even though the stocks done well, they've raised the dividend twice and so that's helped to maintain the yield at an acceptable level for the portfolio. So that's just an example of how the portfolio is managed in terms of the overall characteristics, we've got valuation criteria on the top two clips and then at the bottom, we show some more quality measures. The dividend yield at 4.8%, this is as of September 30th, the dividend yield was twice that of the Russell 1000 Value Index, which is the primary benchmark. And the PE ratio was roughly equivalent the slight discount to the Russell 1000 Value index on the upper right hand. Quadrant and then the EPS variability, which is one of our key measures of quality that just measures the consistency and predictability of the earnings. It was a lot lower than the Russell 1000 Value Index, which is a good thing in our opinion. Yet the return on equity was quite a bit higher, so. Consistency with high profitability that's that's what we like married with high yield and a reasonable valuation. So a good combination here at the portfolio level and then you can see on this slide the overall sector allocations. I mentioned earlier that we have a fairly broad. Allocation pattern across sectors, certainly some of your higher yielding. Sectors are well represented utilities rates. Consumer staples and communication services. But we've also got good exposure and industrials, information technology. And other areas of the market that offer. A good combination of income and. Capital appreciation or earnings growth? And importantly, those risk statistics under the. Standard deviation. You can see our standard deviation for this strategy is a discount for the Russell 1000 value. So much lower risk or if you. Measured by beta, it's .78 versus a versus the Russell 1000 value index at one so. Very low risk, broad sector diversification and attractive characteristics. The top part of this clip just shows the historical dividend yield and I mentioned earlier that the yield has consistently been above 4%. That's depicted here. So we've always had a healthy yield premium to the Russell 1000 value index. I just wanted to point out that. When you. Carry a yield of 4%. The types of stocks you own and the and the dividend yield is going to vary quite a bit from that of the overall market or your primary benchmark. And so here you can see we've got 100% of our portfolio yielding above 2%. Most of those stocks were bought. At considerably higher yields than that. Whereas the Russell 1000 value has only 56% of its allocation in those stocks, yielding 2% or higher. So you really you do have a different. Profile to this portfolio. It's not going to act exactly like the Russell 1000 value index, but it is going to provide a healthy level of income. And a high level of capital. Protection and. Overtime, it's going to work very well for you. This is the constituents as of September 30th, and you'll recognize a lot of the holdings here. Some you may not know or some of your clients may not know, but I can tell you these are all. Somewhat blue chip in character and all have a very strong commitment to the dividend. All have very active capital allocation policies that are working to the benefit of their shareholders. And I should mention that we're long-term investors and so we're intending to own most of these for. Three to five years, which is our typical time horizon. So I just want to thank you for your time in summary. Rusty, I think you've come up with. A superfood here with this recipe, if you will. Uh, particularly if you're retired client or you're looking for income, this is a portfolio that can keep you financially healthy and provide a high level of nutrition. And I think it could help you meet your goals in a very simple and straightforward manner. And certainly it's distinguished from an income standpoint, so. I think that's about most of my time and I'll turn it back to you please, Rusty John, this is great. You know, I like to refer to My Portfolio recipes as tasty, but you know, I like the way you refer to it as super food. So that's great. So I've got some questions for you, but I'm going to hold off. And again, just a housekeeping note for everybody listening in the lower right hand corner, you could submit questions for our two speakers today. And next we're going to speak to Stan from Belle Haven. And I will get him queued up. And here you go, Stan. Welcome aboard. That's great. Thank you, Rusty and and thank you, John. That's going to be a a fun act to follow up with. You put it right on the nose on 20 minutes as instructed, John. And I'm not going to lie. I'm. I'm pretty jealous right now. It's hard to go after a guy with that that good of hair that's that's hard to compete with. So nicely done, Sir. I almost wish I got to go first now but we're going to keep right on schedule. Here Rusty Orion, thank you very much for having us. My name is Stan Sadler, the director of investment solutions here at Belle Haven Investments. It's going to take 1520 minutes and just offer an introduction to the firm, how best we can help service the end advisors, practice and your clients, what differentiates bellhaven? Some unique ideas to help you all grow your practice in this space. And then we'll move right along in time for questions. So thank you, everybody. As far as Bellhaven has a firm, we're a boutique fixed income manager. All we do is fixed income. Think of our knowledge base and our focus as a foot wide and a mile deep. We are experts in investment grade, high quality fixed income portfolios as Rusty mentioned starting off 20 year track record now we've been managing assets since 2002. The firm actually started back in 1991. We were an institutional trading desk. Broker dealer and that history and background is really what separates us from our peers and and the competitive landscape today. 15 billion in client assets were based in Westchester, NY just the hair under 50 individuals all employee owned brand new to the Orion portfolio solutions. We've been working with wealth advisory and the predecessor Orion Brinker for quite some time now, call it a decade. So now we're available via wealth. Advisory communities and the OPS, Orion Portfolio Solutions, when you think of Bellhaven and we talked fixed income, think individual bonds, separately managed accounts. We have a few different strategies which is up on the screen, the portfolio menu and we can always dive into those particularly, but most importantly when you think of Belhaven, it's really too silos. It is traditional tax-exempt municipal bonds, munis, that everyone knows and love. And then the flip side of that is taxable fixed income, the like of what could be CD's or corporate bonds or treasuries. And to give you a little teaser on what's to come, particularly taxable municipal bonds is one of our favorite asset classes, our baileywick, something we're going to be spending a few minutes on throughout this webinar. So, a few different strategies, but perhaps most importantly what I'd want to highlight for you all. Is 2 ideas. One is that with those strategies we can be highly customizable. So we like to build investment grade laddered portfolios on your own bonds and a laddered structure and you don't need to be overly concerned, if not concerned at all with the direction of interest rates or the Fed inflation. What's going to happen? Many of you know the benefits there of a ladder, but we can customize and tailor portfolios to fit what you all may be looking for. That could be a cash management or quasi cash management approach. That could be a long dated munis or our new favorite one. We have a few clients, they call it the sit on the beach portfolio. We're all they want to do is by 30 year paper out as long as they can ultra high quality, lock in a yield with millions of dollars and sit on a beach with their tax free income for the rest of their lives. State preferences, socially responsible investing, investment policy statements, you name it, we can customize and tailor. Around your specific needs. Now when you think of Bellhaven and our 20 year tracker track record strategy peer group Benchmark consistently outperformed in our sphere three-year, five year, 10 year since inception, we've been able to produce a consistent high level of excess return and alpha regardless of which strategy and nuance and customization. When you think of the fixed income space, most investors focus their time on trying to outsmart the market or outsmart. Their competitors in terms of credit research or in terms of yield curve positioning, trying to pick which way the wind is blowing with interest rates. We certainly care about those two ideas quite a bit and we have a team that focuses around that investment grade, high quality diversified sleep at night type of portfolios is RMO, but outside of those where we deploy excess return and alpha. Is really the idea of efficient execution. When you think of the municipal bond space overall, it's an inefficient landscape. Municipal bonds are not exchange traded like most other investments. So that makes it opaque, makes it a little confusing exactly what a bond is worth. Buyers and sellers tend to not interact with one another. They do so through a middleman, right, a trading desk, a broker dealer and investment bank, etcetera. And none of those middle men work for free. So our claim to fame. Is to have a more efficient execution than advisers can on their own or other firms can on their own. Due to our unique structure, if you're unfamiliar with that structure or that advantage in the interest of time on that webinar, I'll just sort of tease it out there. But please get with your Orion Rep, get with the sales team, let's set up another call and really dive into that value add what's that pirates bellhaven from the hundreds of investment options that Orion has dove through and chosen to spotlight us. So efficient execution is a big deal with what we do. We like to build laddered portfolios, but we don't do so as plain Jane standard kind of 1 to 10 year, 10% in each maturity ladder. They are what we call a lumpy ladder or more of a thoughtful ladder. We're still focused on total return. Where do you get the most bang for your buck, the best spot to be on the yield curve. Balance that with the general thesis of a ladder and the general thesis of execution advantage and an active approach, we press our advantage with some smaller position sizes. We could buy big new issue names that everybody's familiar with in the municipal bond space, but we could also go by 500 of these and 1000 of those and three thousand of those where we can get a little more value. Think of us as sort of size agnostic or some of the big players maybe won't participate. We can find more value, more opportunity, really put the pedal down on our execution advantage. And then lastly, opportunistic, think of that as an opportunistic overlay, sort of an active approach that separates the bellhaven strategies from the peer group, from the benchmark, from your other options. Available to you. Outside of delivering excess return alpha High end performance, when you think of bellhaven, what we really want you to think of us as a partner to the advisors practice. We are not just an asset manager that you plug in and you hope to get performance and you never hear from us again. Quite the opposite. We've built this firm 20 years ago with the thesis of we're going to deliver performance and we're going to deliver service and what we mean by service for perspective, we don't market to individual investors directly, we don't work with individual investors directly. So you're never in competition with us if you're the advisor. We are there to help you maintain and grow your practice and why that's important is we put tools and resources and plans in place to do just that. So when you have questions or comments on a portfolio or need additional analysis, we look at our our entire firm as we only grow if the advisors practice grows, so how do we get the advisor what they need. So that could be accessibility one way we do that. For those of you that have questions or needs directly related to Belhaven, just reach out to service@belhaven.com. I talked about some of the customizations. For those of you that have portfolios outside of Belle Heaven's management and you want a second opinion, could bellhaven improve them? What would they do differently? How would you move forward with this portfolio that's already positioned? We can review those reporting on the portfolio as far as, hey, monthly, here's how the portfolio is doing at the end of the year. Here's how the portfolio did portfolio review, but down to trade by trade. When we have really cool trades in the portfolio which may be pressing our execution advantage or maybe a really cool bond that we bought with an awesome yield or an awesome story or something like that. We want to share that with you, the end advisor, so you get the idea. A lot of support tools to help you the practice so you can go relay directly to the end client and simply say, hey look, this is what your fixed income manager is doing for you, This is why. Or the value add that is offsetting the fee and not just providing simple performance and investments, but helping you feel attuned to what's going on in the market, education and comfort along the ride of the investment period. So please lean on myself for that. Please lean on my colleagues for that particularly service at bellhaven.com is the best way to get in touch with us. I talked again about that customization look as a $15 billion asset manager, we fly under the radar with most firms and we like it that way. That's our edge. But with that said, for those that recognize us, such as Orion, kudos to their research team and we're certainly a pretty competitive group when it comes to performance and what we do here, so. We've been awarded some some pretty significant industry awards, particularly for a boutique shop like ourselves that tend to not be recognized as much as some of the big players. Some of them are tied to pensions and investments. PSN, Enforma, you all would be familiar with if you do any institutional foundation things like that, particularly our taxable plus strategy which focuses on the taxable munis and some corporate bonds which I'll get into momentarily has won back-to-back. There's strategy of the decade and what that award means via PSN Enforma is they look at the entire peer group call it 200 plus individual strategies and managers and they look at decade prior, so 10 years risk adjusted outperformance or underperformance versus all of those peers and you have to be in the top ten managers or strategies to be awarded and noticed as a top manager PSN award. Manager of the decade, not only were we in the top ten, we actually took the number one spot out of that entire peer group for this strategy. So a little hat in our quiver to say, look, what we're doing is unique, what we're doing is different. And kudos to Orion and the research team for for kind of finding us a diamond in the rough way back when. So we can talk about different strategies and and what we're doing in each of those and some of the nuances there. What I really want to focus on SO2 simple ideas. One is we talked about we have tax-exempt municipal bond strategies highly customizable to fit your clients needs investment grade laddered, slightly active looking to generate excess return income. But first and foremost again everything we do is safety, safety, safety is preservation of principle. We are not the make you wealthy. Make you look like a home run rock star Muni manager. We end up doing that overtime in little increments. But Simply put our number one job is that Orion the advisor, the end client can sleep well at night and that's what we do in all of our portfolios both tax exempt and taxable. Now what I want to highlight in just the next few minutes here before we go to questions is particularly our focus on our taxable fixed income strategies. I'm sure many of you use treasuries and mortgage-backed securities. Corporate bonds, but I would guess, I think an educated guess to say that the majority of you are not utilizing taxable municipal bonds unless you're doing it through Rusty and his team via bellhaven. That is, if you take anything away from Belhaven side of this webinar, you take one idea away, it's to take a serious look at the taxable municipal bond market for qualified money. So anywhere where you'd consider using a treasury or corporate bond. Or a mortgage-backed security you should be or a CD. You should be exploring the idea of a taxable municipal bond. A taxable municipal bond is our bread and butter in our taxable strategies. Historically, over 15 years, we have had a majority tilt towards the taxable municipal bond market. More than half the portfolio has been invested in taxable munis. But over the past 24 months, that tilt has gone as far as about 85 to 90% taxable municipal bonds over the likes of corporate bonds and similar. And that's a function of where we may see the economy heading. So what I want to talk about is 2 ideas for you, what is a taxable municipal bond? .1 and two, why would they benefit your clients? What a taxable municipal bond is, there's some nuances to it, but Simply put, it's a municipality that is borrowing money just like a traditional tax-exempt muni, except they are paying taxable interest. So comparable to that of a corporate bond or similar, that taxable interest tends to be tax free in the state of residency, but it is taxable at a federal level similar to that of a treasury. Again, corporate bond. You get the idea. So they're great. For institutional type money, foundations, endowments, religious organizations, non for profits, etcetera. They're also great for traditional qualified money and individual retirement account and IRA etcetera. They can also be great for those investors that are in a very low tax bracket. Maybe they just sold their business and they have quite a large sum of money, but they have no earned income anymore because of that lower tax bracket. Taxable municipal bonds may be a benefit to them. Again, simply it's taxable interest. From a municipality, there's a few nuances and reasons, and I'm sure we'll come up in Q&A on why municipality may issue taxable municipal bonds over tax-exempt municipal bonds. But in general, the most important point for the investor is from a credit quality perspective, it's effectively the same thing. Many of the municipalities that you know and love from a credit perspective and a comfort perspective issue both they issue tax-exempt municipal bonds as well as taxable municipal bonds for a variety of reasons. So from the investors perspective, the first reason why we are overweight recently and why investors should be interested in this space is the safety component when it comes to taxable. Municipal bonds, if you look in the top right corner, we have a blue and red chart up for you all and we just show the rating distribution of municipal bonds versus corporate bonds. And you'll notice municipal bonds in the red are all the way to the left, AKA higher credit quality, AAA, AA, single a, corporate bonds are all the way to the right, tend to be more triple B, maybe single A, some AA, high yield, etcetera. Fun fact for everyone, there's only two corporations in the whole country at this moment that are AAA rated. And one of them will actually most likely be going away based on our analysis. In terms of the rating going away, there's only 14 companies in the whole country, 14 that are AA rated or higher. So if you're concerned about a recession, a slowdown, corporate bonds are great. I'm not here to knock them. But if you're looking for higher ground, higher credit quality, the use of taxable municipal bonds in your portfolio, perhaps in conjunction with or over the idea of corporate bonds is our thesis going into 2023 and why we are overweight. That's a class, so .1 for your investors. More safety, higher credit quality. .2 for your investors, the same income. Typically if you're going up in credit quality, you'd be giving up income in this compared to corporates for example, in this particular instance you are not so higher credit quality, similar income. And then the third which you may have picked up on already is just added diversification in your portfolio. So it's not to say sell all your corporate bonds. I'm picking on corporate bonds just because simply they're a well known asset class that people are be familiar with, but think of treasuries, corporate CD's. Money markets, all the traditional taxable fixed income use taxable municipal bonds either as a core but as a minimum as a diversifier to go up in credit quality and maintain the same income. Last thing I'll say on taxable municipal bonds for those following along via video on the chart you will see on the right hand side chart what we show you is a 15 year study, but we can grab many different time periods from S&P and Moody's and what they're looking at here is they're comparing taxable municipal bond default. Rates compared to US corporate and global corporate. And the gist of this study is that a triple B taxable Muni historically actually defaulted less often than a AAA corporate. And a rated taxable Muni defaulted less often than a AAA corporate or a global corporate. So you put that in front of an investor that's never heard of taxable municipal bonds. You're trying to find a way to work with the future prospective client and nonprofit and endowment, something like that. This chart can be a powerful tool and one of the examples of how we like to really work with our partners to help educate and help support them so. In sum. I'll leave you all with. Taxable munis. Offered tremendous value for clients. Would love to dive into those further. Bellhaven has a firm, whether we're talking taxable fixed income or tax exempt fixed income. Focuses on service, focuses on a high level of customization, and has a unique, repeatable trading advantage that over longer periods of time produce consistent excess return and alpha. Would love to dive into that further for any of those interested post webinar. And lastly as I touched on, we're specifically here to help you all maintain and grow your practice and have great conversations with the end client. So please lean on my team reach out to us at service at bellhaven.com. Rusty, I tried to, I tried to take a page out of John's book. I I think I'm on, I think I'm on track here on queue. So I guess we're both decent job there. Awesome. Well, thanks Shellman and I'm going to go to the portfolio recipe slide here and again I work with. Ryan's Ben vaski. On the wealth advisory portfolio recipes. So I have to admit as one of the chefs of our portfolio recipes, I think every ingredient we've ever used has been a great ingredient. But after listening to these two gentlemen, this is particularly tasty ingredients. You can call them super food ingredients or sit on the beach ingredients. So they come together here and these are just some ideas of how to mix them. And what we do is we do target sort of the Orion risk score objectives. So for an for a growth oriented investor for instance, you can see on the far left. And we take these portfolios all the way down to conservative income. When it comes to our other portfolio recipes, you can find them if you go to ryanportfoliosolutions.com, you go under the resource drop down menu, you find a whole bunch of resources, but of course they also include our portfolio recipes. So I'm going to ask some questions. I do have a budget. First of all, I'm going to go to Stan first just because I, I bet probably everybody else listening had this question and I'm sure that probably John knows the answer, but I don't. And who are those two companies that have? Properly credit ratings. Yeah, it's it's just a fun trivia fact. There's a lot of nuances to it, but currently in the United States that the only two is on Microsoft and Johnson and Johnson. And if if our corporate credit analysts are right, Microsoft will be on a watch down to a AA plus at some point here in the near future. And there'll only be one left to find that bar trivia game, if nothing else. Doing it for sure. So thank you for that. So John, I have a question for you. So there is a, there's a common notion with some investors that dividend yield equity strategies. In terms of periods of rising interest rates and so bonds aren't doing so well. How do you live in yield strategies perform in those environments? Some people don't really want them in those environments. What is your take? How did dividend yield equity strategies tend to perform in periods of rising interest rates? Rusty, generally speaking, a lot of higher yielding equities are considered to be bond proxies. It's because they. Either have businesses that are highly interest rate sensitive or. They're considered almost fixed income securities by investors because by nature of their high dividend yield, so. Those types of stocks typically don't do very well when interest rates rise. Of our strategy actually does pretty well when interest rates go up. We we experienced the positive return in 2022 and clearly that was the the most significant rise in interest rates we've seen in many, many years, not many many decades. And there have been other episodic periods of increases in interest rates and. This dividend yield strategy that we implement with its broad sector diversification pattern. And the avoidance of these super high yielding bond proxies has enabled us to do quite well when rates have been rising. So we think. High quality bonds and equities, when paired in this fashion can provide a really nice return pattern and a smoother ride for your investors. Yeah, yeah, great. Well, while since I'm asking about interest rates and the potential of rising rates still is going back to stand, what is bellhaven's view on the Federal Reserve or is that even a factor in your decision making process and building portfolios? Yeah, that. Thank you rusty. How much time do we have? Two hours, 3 hours for this one. Gosh. Alright, let me, let me see if I can keep this one so sync for you rusty. So our view is that the Federal Reserve is in the 8th or 9th inning of the game here and they're pretty close to being done. They're trying to walk a very tightrope between, call it what Arthur Burns did back in the day versus what Mr. Volcker did back in the day, AKA raise rates and then cut too early and then inflation comes back and then you have a double whammy problem or continue to raise rates and leave rates. On and send the economy into a double dip pretty nasty recessionary environment so we do not envy what they what they're doing our view is they're they're probably on the side of a of caution and sending us you know into more of a troubling economy partially because they got some egg on their face on on being late to the game on raising rates and and now they got to kind of back that off to to save face with the investment community a little bit you know with the transitory and then the thinking about thinking about comments and. You know, there's there's some, there's some easy things to kind of beat them up on if you wanted to. But with that said, we think they're in the 8th or 9th inning. They're closer to being done, absolutely. You know whether it's 25 or 50 or how long it goes, ultimately we believe they're going to pause this year. And we wouldn't be surprised to see them pivot the back half of this year, if not at least early 2024. Now that gives you a sense of what the Fed's doing. Now more importantly, where are interest rates going? The interest rate world, the fixed income world is already pricing in those happenings. The expectation is already the pause and then the pivot. So what a lot of investors are doing is they're kind of sitting in cash or sitting on the short end of the yield curve and saying, well, I'm just going to hang out and wait until I get the. You know the the all clear the thumbs up the green light from the Federal Reserve and then I'll step into the fixed income market in a meaningful way or extend duration or whatever that may look like and you just can't do that. You know you've already missed an 80 basis point move in treasuries look at where the 10 year is called a 350. You know a time of recording we we got to about a 4:30 we're 80 basis points off of that. So look inflation peaked 5 months ago the feds in the 8th and 9th inning here rates. Probably peaked 5 months ago. We're looking at a world where we wouldn't be surprised to start seeing rates become range bound or eventually actually trickle lower. So the last thing we want to do is take on credit risk in this environment. But for those that are sitting in cash or ultra short, you have a an opportunity here over the next couple of weeks, perhaps months to finally lock in those interest rates. I mean, Rusty, John, gosh, how many conversations have you had? Regardless if you're in equities or bonds with clients, for the past four years I've said, hey, I'm retired, here's my life savings. Now I need to generate an income off of it. Oh, but wait, I can't generate an income in some form or fashion, right? Hence why John and I are on this call, because there's limited options to generate income. At least now there is. So what's happened over the past three or four years? You've gone out on the risk spectrum. You've done the Tina acronym, right. There is no alternative. There is nowhere else to go. So my 6040 portfolio went to 8020. Bonds didn't perform. I didn't like them. I didn't know what to do. When you see that snapback as investors say, hey, you know I can get 5% taxable, 4 1/2% taxable, I can get 3% tax free. You're going to see that 8020 snap back into a 6040. And we wouldn't be surprised quite frankly with a little help from the Fed, with a little help from rates to see fixed income ever have a really nice snapback year here and we probably saw the highs in rates for some time. Well, first of all, I would say that question has been pretty common last four years, but really it's been 20 years. People have been asking that question particularly acute the last four. So Johnny Crawford in terms of macro, their bottom up stock pickers, so you're doing fundamental research on each day of your portfolio. Some of these macro issues such as what the Fed is doing and where interest rates are going. Is that even factor into your decision making process? Rusty, it really doesn't factor into our decision making process because. We don't think we can get an edge by predicting what the Fed's going to do or what the economy's going to do. We do try to have an informed position on the world, however, and. That's leading us to the conclusion that we're probably regardless of how long the Fed stays tight or. Whatever these cross currents are in the economy, we're in for probably moderate growth outlook pretty much as far as the eye can see, which suggests that maybe profit growth would be fairly pedestrian. Certainly we expect to see profit growth or earnings growth, but probably not at real robust levels. And so in a more modest profit growth environment, you'd expect investment returns to be more. Normal or maybe lower than they have been over the last five to 10 years. And as a result of that we think having that 4% plus dividend built into your return stream, having high visibility in terms of quality and consistency and fundamental progress to these businesses, we think on a relative basis that this strategy is positioned to do quite well so. Yeah, you're right. We don't really have a a macro opinion, but. Are are when what we see. Fosters a good outlook for this strategy. I love blending portfolios together, a strategist that have just different styles of investing. So obviously fixed income managers a lot of times while they do bottom up work they they might have a little more emphasis on top down and about equity managers just sort of the opposite that a little bit. So I definitely like those mixtures. So I want to stick with Crawford here for a second. And again I think one of the things that makes your dividend strategy different and you definitely highlighted this a bunch of times, but it's really sort of that quality factor and that intersection between quality and yield. I just wanted to drill down a little bit. Run that so when you're looking at quality, you're looking at lower earnings per share variability. Now, is this measure more or less important when you're looking at higher yielding stocks? It we think it's important for all stocks for us because it's really a good measure of quality or consistency or predictability if you will. But it is particularly important for high yield stocks because companies that have high levels of earnings variability, if they all fall also offer a high dividend yield, their payout ratio is going to increase to an uncomfortable level and so. Companies where you have maybe higher payouts but earnings consistency, they can afford to sustain those payouts and actually in some cases, many cases raise their dividend. The risk of a cut is much reduced with lower earnings per share variability companies. So yes, it's very important to have high yields with low earnings share variability and that leads to what we consider to be dividend integrity, which just means the company. Can afford to continue to pay and sustain the dividend at an attractive level, which is what you want if you're managing an income oriented strategy. Indeed now stand on the on the latter portfolio as what makes them different. You again of course mention this is, I love the concept of a lumpy ladder really it's just a thoughtful ladder in terms of how you're constructing it. I also like you know a lot of ladders are set it and forget it, you guys are active about it. So very cool features to your ladder strategy. But the question I have is and I bet you get this all the time. Probably every day is like when do you use a ladder strategy and when do you just use a fixed income fund? When what what particular situation? Do you use one for the other? What's your guidance on that? Yeah, it's, it's it's a good question rusty and it it always comes down to really what the clients goals and objectives are and and some nuances around the clients. You know we we manage both, we manage funds, we managed separately managed accounts. What we tend to see is our ultra high net worth, our larger dollar amounts tend to flock towards the separately managed account or the smaller dollar amounts tend to go in the fund space and there's some. Reasons for that and some structural reasons. You know, when you think of a fund, some of the the great benefits of a fund structure is 1. Just the simplicity, right? You just you buy it and NAV, you're in the fund. Boom, done. There's no complications to it. You sell, right. Same idea, some liquidity nuances to it, kind of nice and easy. The the biggest benefit for most investors why I mentioned the idea of the the fund with smaller dollar amounts is simply the idea that you can take a relatively small amount of capital and you can be tremendously diversified, right. You can own thousands or thousand municipal bonds with a simple $50,000 investment, which is really powerful. So separately managed accounts tend to have much higher minimums. You like to see, you know, at least a half $1,000,000, typically $1,000,000 somewhere in that range. For individual bond portfolios. Because if you're significantly below those dollar amounts, what tends to happen is all the benefits that you could have with owning individual bonds, which I'll get to in a second. You have some issues perhaps with the opposite idea of your lacking diversification and in the bond world more than any other world. Again, I talked about the idea of safety and sleep at night portfolios and that has to be goal #1. Now, the beauty of an individual bond portfolio, you have customization, you have transparency, you know you're not commingled with all the other investors. So this portfolio can be managed specifically to your tax situation, your goals, your needs, etcetera. Um, so that tends to be a driving factor. Tax consequences, et cetera, really set up for the direct individual or entity. My favorite benefit, especially when combined with a ladder structure of an individual bond account, is the idea of, you know the exact date that you get your money back. Remember, municipal Bond really simply is just a loan. You're just taking your money and you're loaning it to a municipality, collecting interest along the way and. Waiting for them to pay you back on the end date. There is no pure structure and simpler and clearer structure. When you get your money back, then if you own the individual bond and then if you do that in the ladder structure, you get even further sort of benefits and optics behind that idea, right? I know. Hey, I loaned my money to a municipality 2 years in December. I get my money back regardless what happens in the economy, the war, the Fed, you know, God forbid something happens in the world, you know? Unless something happens with that municipality, I get my money back. So you tend to be less concerned about interest rates when you own individual bonds because you take it for what it is. You just own an individual bond. You know your interest rate. You know when you get paid back, when you get paid back. You can then reinvest it back into a new bond, AKA that ladder, and if rates are higher at that time, you have a new higher yield. Think of it no differently than you would have CD if you bought a one year CD, A2 year CD, and a three-year CD. It's the exact same idea, except with individual bonds. You see that price fluctuate on a day-to-day basis. But if you own your bond until maturity and you own the individual bond, no concerns there now in a fund. The catch is the bond manager may be buying or selling that bond. Before that maturity date, because it needs to by mandate. If money comes into the fund, the manager needs to buy more bonds regardless if you made the investment or not. If money goes out of the fund, the manager needs to sell bonds, and many times they'll need to sell that bond at a loss if interest rates went higher. So tends to be, I'd say a little more interest rate risk in a fund, a little more vanilla from rates and individual bonds. But then you also want to make sure you have enough capital that you get the proper level of diversification if you're going to invest in individual. Months over a fund. That's great. John, question for you is higher yielding stocks have lower price volatility or total return variability because of course they have dividends. So they tend to be less volatile and less risky over time. But some people think that higher yielding stocks provide lower returns than stocks that don't have dividends. How do you rebut that? You know, the studies actually indicate that higher yielding stocks provide higher returns. Rusty and. That wasn't the case in the period ended 2021, where investment returns were mid teens compounded for 10 or 12 years. But over longer periods of time, full market cycles where you have both advances and declines. The higher yielding stocks have done a lot better as we looked at on that. One of those early slides we showed and one of the main reasons for that is simply because. Higher dividend stocks and dividend stocks in general, they do tend to do much better in market declines and so preservation of capital is one of the best ways to get ahead. It's certainly part of the. Part of the formula here at Crawford to provide satisfactory returns and you also have just the the added income that's coming in every single year that income is positive year in and year out, whereas stocks with no dividends don't have that. So you got to tailwind from dividends, you got a preservation of capital element and overtime that combines to produce much better returns with less risk. Yeah, great. Well, I got one last question before we go to closing comments and that is what would be the point spread be if the Georgia Bulldogs and football play the New York Giants? I know I'm mixing and match in there, but Kirby Kirby would be a favorite. I'll tell you that much. The Giants, the Giants are playing above their their historical norms. Here George is destined for greatness. I think it's a trick of Rusty. There we go. That's what I was thinking that those Bulldogs sure look tough. So well gentlemen, again thanks for your time today. I really appreciate it. I do think this is again a very tasty portfolio recipe coming next month. Our portfolio recipe is the market cycle advised mandate portfolio recipes. So you can register now. Again, we will be sending out an e-mail shortly that has a replay of today's webinar including all the resources as well. Thanks again, gentlemen and thank you everybody watching. Thank you for your time and trust and we will see you next month. Thank you. _1732288517481