Questions

What is
value
investing?

How are
these
objectives
achieved?

What are
these
patented
processes?

Why is this
experience
significant?

Water Street is a registered advisor whose business is creating and managing portfolios of investment securities to maximize the returns available to a property casualty insurer for investing their surplus and reserve assets.

These portfolios are constructed using the discipline of "value-investing" --  the  objective of which is to create the following advantages: 

• Portfolio volatility is minimized – value-oriented investments operate at a lower level of risk than their peers.

• Potential returns are maximized – lower volatility allows investing in sectors of the market whose risk would otherwise be intolerable to an insurer's investors, rating agencies and regulators.

• Management expenses are minimized – this is a buy-and-hold strategy.

Applying this discipline across the breadth of the +$50 trillion global securities market requires unique and novel selection processes. The proprietary nature of these processes is protected by (3) patents.

A series of portfolios made from these processes each quarter and held for successive 5-year periods since December 1991 (5-year periods ending 12-31-96 to 03-31-10) has generated a 10.00% average annual return -- approximately 500 basis points greater than the statutory returns enjoyed by the average property casualty insurer over this period.

There is at least one other investment manager who has successfully employed this value-strategy for investing the assets of a property-casualty insurer.  Since 1991, Warren Buffett has also generated a 10.00% return on the investments held by the insurance companies within Berkshire Hathaway, while maintaining a level of investment risk commensurate with the requirements of investors, rating agencies and regulators for the prudent management of those assets. 

Marking against this track record, my portfolios have generated a  like level of investment returns -- at a slightly lower level of investment risk -- see tab [ADV Part 2] for details.