Investment Firm Overview: Hennion And Walsh Asset Management Company - Kevin Mahn, Managing Director
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KEVIN MAHN joined Parsippany, NJ based Hennion & Walsh Asset Management Company as a Managing Director in 2004. Mr. Mahn is responsible for the Asset Management activities of the Firm. Specifically, Mr. Mahn has developed and manages various fee-based asset management programs for both individual and corporate clients. Individual clients enjoy the benefits of mutual fund wrap and separately managed account solutions while corporate accounts can leverage the benefits of managed accounts within the retirement savings program that they offer at their respective companies. Prior to Hennion & Walsh, Mr. Mahn was a Senior Vice President at Lehman Brothers where he held the positions of CAO of the High Net Worth Product and Services Group as well as COO of Lehman Brothers Bank.
TWST: As we did before, if you would just give us an overview of Hennion & Walsh and your investment philosophy?
Mr. Mahn: Certainly. Hennion & Walsh is a full-service investments firm headquartered in Parsippany, N.J. Bill Walsh and Rich Hennion started the firm in 1990 with the goal of being an advocate for the individual investor. The firm's heritage rests in fixed income securities, notably municipal bonds. However, the firm has broadened its product and service offerings in recent years to provide both income and growth solutions to the individual investor following our core principles. We operate out of three distinct companies, one is Hennion & Walsh Incorporated, which is a full-service broker dealer catering to the individual investor, and has slightly over 15,000 clients and approximately $2 billion in client assets.
We also have Hennion & Walsh Asset Management Company, which provides personalized portfolio management solutions to high-net-worth individual investors as well as small to mid-size 401(k) plans. Through the asset management company, we launched three open-ended mutual funds in June 2007 - the SmartGrowth¨ Mutual Funds, for which I am fortunate to be the portfolio manager. We also currently have nine different unit investment trusts (UITs) that we market under the SmartTrust¨ brand. Finally, the third company is Hennion & Walsh Wealth Advisors, which helps to provide individual investors with insurance solutions and estate-planning assistance. What I'd like to focus today mostly on is the evolving story of our SmartGrowth¨ Mutual Funds, as they represent an investment solution that we put together for individual investors looking for a professionally managed, diversified growth opportunity.
The SmartGrowth¨ Mutual Funds are an investment strategy that utilizes exchange-traded Funds (ETFs) and exchange-traded notes (ETNs) in an asset allocation framework to provide investors with opportunities for risk-adjusted return based upon their own appetite or tolerance for risk. We have a conservative fund, we have a moderate fund, and we have a growth fund. Three ticker symbols are LPCAX, LPMAX and LPGAX, respectively. Within those strategies are different combinations of ETFs and ETNs that are arranged to provide for optimal growth while staying within a certain band of risk that we measure by standard deviation. We at Hennion & Walsh Asset Management do not pick the ETFs or ETNs for the portfolios but rather track the ETFs and ETNs that are in the associated Lipper Optimal Indices. You see, the SmartGrowth¨ Mutual Funds are essentially index-tracking funds in that they attempt to track the Lipper Optimal Indices. Lipper, a Thomson Reuters company, is one of the most recognized mutual fund and ETF research companies in the world. And we have an exclusive arrangement with Lipper such that no other company in North America can launch a mutual fund off of the Lipper Optimal Indexes other than Hennion & Walsh Asset Management. The Indices, and by default the funds that track them, rebalance or rather reposition themselves each calendar quarter. The quarterly repositioning is one of the main premises behind the indices, as the Lipper methodology contends that a portfolio designed for diversified growth should be repositioned at least four times a year.
Following this quarterly rebalancing mandate, the Lipper Optimal Indices use the last six months' worth of historical returns, the last six months' worth of correlations and the last six months' worth of standard deviation data to build a portfolio that they think will be optimal for the next three-month period for each associated range of risk. The best way to look at this strategy, I believe, is to think of it as a three-month portfolio that is consistently rebuilt four times a year. With respect to portfolio composition, Lipper uses a very interesting approach to selecting the ETFs or ETNs collectively known as exchange-traded products (ETPs) for the portfolio each quarter. They start by looking at ETPs that meet certain initial screening criteria, such as those ETPs that have been trading in the U.S. marketplace for at least six months. They then look for those ETPs that have a good amount of liquidity, which we are defining right now as having $1.5 million traded each day based upon an average of the three-month and six-month trailing volume averages.
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