Dear friends,

Welcome to Aleph Investments.  I manage stock and bond assets for upper middle-class individuals and small institutions.  My minimum is $100,000, which in the separate account world is small.  My only income comes from asset management fees, and clients get a clone of my own portfolios with stocks and bonds.  My interests are entirely aligned with those of my clients.

If after you read this, you are interested, please look at the documents, and e-mail me to get a copy of the Pitchbook, which offers details of my equity management that I will not put on the web.  My clients come first, and I don’t want to disclose for free data that clients and serious inquirers should only have access to.

What you get from Aleph Investments

Equities

I give you professional management of a stock portfolio with 30-40 different stocks and cash, which is very close to a clone of my own portfolio, in which 70%+ of my liquid net worth is invested.

Fixed Income

I give you a portfolio of fixed income instruments that has a goal of preserving value in all environments. Some of my family’s money will be invested here, but it is unlikely to be a large part of the investments of my household.

In General

Aleph Investments has full discretion to buy and sell assets, but not to move assets or cash out of your account. Custody is provided by Interactive Brokers as a safeguard for you. I never have access to client funds, even to receive our fee I must bill you and send notice to the Custodian. You can pay the bill or the custodian will remove assets from the account. For those with IRAs, paying the bill maximizes your tax-deferral.

Transparency – you can review your portfolio at any time at Interactive Brokers. Your cost is limited to the fee you pay me, plus transaction costs at Interactive Brokers, and any other fees specific to your actions regarding your account at Interactive Brokers.  (Note that Interactive Brokers has a modest inactivity fee of $10/month; given that their other transaction fees are low, that is a small price to pay.)

Interactive Brokers will provide you with a quarterly statement; I will provide quarterly commentary.

Though I would like my clients to stay with me a long time, your account can be fully or partially liquidated, and transferred to you or another asset manager.

Investment Policy Statement for Aleph Investments’ Equity Strategy

The equity strategy is designed to be about as volatile as an S&P 500 index fund. It is not as diversified as an index fund though, because it invests in only a few of the many industries available, and holds only 30-40 stocks at a time.

In general, the strategy invests in industries where pricing power is improving, or likely to improve, and valuations are cheap relative to growth prospects. Within industries, we select stocks with strong balance sheets. When pricing power is improving rapidly, it can accept companies with somewhat lower balance sheet quality. It also aims for companies that have reasonable earnings quality, reviewing a number of accounting summary measures that tend to correlate with good stock performance.

The strategy is US-centric, but not US stocks only. In the past, non-US stocks have been as high as 40% of the stocks in the portfolio. Ordinarily, that figure is more like 20%. At present, the strategy only purchases assets traded on US and Canadian stock exchanges. The strategy can use ETFs and closed-end funds to access areas of the market outside the US and Canada. When investing outside the US and Canada, investment is limited to countries that respect and protect the rights of outside, passive minority shareholders.

The strategy runs with 0-20% cash, which is adjusted based on relative advantage in the market. Market timing is not a core skill of the strategy. That is why the limit on cash is 20% and not 100%. The cash will ordinarily be invested in a money market fund, but can be invested in bond ETFs or closed-end funds if there is some advantage to be found there.

The strategy does not trade frequently, and tends to generate turnover in the area of 30%. Three or four times per year, new companies are purchased for the strategy, and typically 2-6 companies are added, and a similar number sold. The strategy uses “the economic sell rule” which is that you swap assets you like less for those you like more. Additionally, securities are bought and sold whenever they run 20% away from their target weights, to rebalance the positions.

One more feature of the strategy is that tax losses can be harvested if needed; during those times, an asset that is a close substitute temporarily replaces the asset that was sold. Also, appreciated assets can be donated to facilitate charitable giving.

Investment Policy Statement for Aleph Investments’ Fixed Income Strategy

The fixed income strategy is designed without regard for volatility, and does not pay attention to any fixed income benchmarks. It does not target a given yield level. It is designed to try to preserve capital in purchasing power terms, avoiding risk when risks are not being fairly rewarded, and taking risk when risks are being more than fairly rewarded.

Since we are working with small accounts, and aggregate assets in the strategy are likely to be small in bond terms, where liquidity typically only gets good when trades get over $100,000 at minimum, and $1 million more normally, we will be using ETFs and closed-end funds primarily to execute this strategy, with bonds being used directly when they can be traded with low all-in costs.

In general, the strategy considers the following risks – duration, convexity, credit, illiquidity, foreign exchange, inflation, and sovereign.

The strategy is US-centric, but may involve foreign bonds and currencies when there are few opportunities to profit in US investments.

The strategy runs very close to fully invested, with cash-like investments at higher levels when there are few opportunities, and low levels when there are significant opportunities.

The strategy may trade frequently, or little, as conditions demand. This is meant to be an opportunistic strategy.