Alternative Investments

Alternative investments have gained increasing acceptance as an important part of portfolio diversification strategies.  However, we feel that a number of alternative investments, such as some hedge funds, are often fraught with undisclosed risks.  It is apparent that many hedge fund managers, in an attempt to generate the promised high returns often utilize strategies involving significant leverage, high-risk derivatives, market timing, and futures contracts. Accordingly, we feel many of these investments come prepackaged with risks that, while disclosed, are not fully appreciated by many investors. 

Many individual investors and even a number of traditional equity managers are generally uncomfortable with the “alternative investment class”.  As a result, they are likely to either avoid this asset class entirely or to unknowingly increase the overall risk of their portfolios by participating in a limited number of individual offerings.

Branzan seeks to provide a conservative low risk and low fee solution to this problem without resorting to the use of leverage, derivatives, futures contracts, or short sales.  Branzan’s primary investment objective for all clients is to generate superior risk-adjusted rates of return by investing in a broad spectrum of alternative securities and other investments that have low inherent risk, that can be purchased below intrinsic value and that generally have little or no correlation to the traditional equities markets. 

Strategy 

Branzan Investment Advisors’ focus on low correlation with traditional asset classes combined with vigorous risk assessment leads to a unique pool of investment opportunities that may include certain equities, bonds, mutual funds, notes, natural resource royalty interests, real estate and other financial instruments.  Also included in this pool are a number of illiquid opportunities such as public and private partnerships, direct investments, liquidating trusts, distressed securities, direct loans, and venture capital situations.   

Once identified, these potential opportunities are subjected to fundamental analysis to further determine those securities that, in our assessment, appear to be significantly undervalued relative to their intrinsic value and risk.  Having passed these tests, initial positions are taken in appropriate portfolios with subsequent investments made depending on pricing.

Deal flow is crucial to our strategy.  Branzan works with individuals, retirement plans and private equity firms to find appropriate investments. In addition, working with partners and friends of Branzan, we have been able to create investment vehicles specifically structured to meet Branzan's criteria.

Risk Management

Once Branzan Investment Advisors determines that a potential investment has met the three primary criteria of identifiable and measurable risk, low correlation, and attractive valuation, an initial position is established.  The investment will then be monitored in a number of ways: (i) continuing fundamental analysis; (ii) diversification with regard to the portfolio’s positions in other sectors; and (iii)contribution to the overall portfolio’s level of liquidity.  In this way, Branzan will regularly subject each investment to a fundamental re-evaluation and reassess the appropriateness of continuing its position within the overall portfolio.

While Branzan Investment Advisors tends not to be an active trader, we regularly adjust portfolio positions in liquid securities if significant price moves occur. While this is typically in response to a balancing of the portfolio holdings, it can result in short-term tax consequences.

Summary 

As a Branzan Investment Advisors’ client, you can benefit from diversifying into a broad range of alternative investments. By including this alternative investment strategy in your overall investment portfolio, you may achieve the benefit of reduced market correlation, lower volatility compared to traditional asset classes, superior risk-adjusted rates of returns and the ability to profit in down markets. 

Branzan Investment Advisors, Inc.