Michael O. AdairManaging Director, Senior Investment Consultant | 2018

Preservation

High-net-worth clients typically dislike losses more than they like gains.

High-net-worth clients typically dislike losses more than they like gains. Generally speaking, older and usually wealthier clients can have less time and/or ability to recover from losses. After the financial crisis of 2008, we believe that capital preservation and active risk management became top of mind for many. Clients want to protect their wealth and at the same time accomplish many different goals.

Market volatility is a big concern for many clients, particularly as the current expansion matures. During major market moves, it’s natural for investors to question their investment strategy, but one of the benefits of professional management is decision-making based on facts, not emotions.

Providing active risk management techniques such as strategic asset allocation, rebalancing, and downside loss controls can greatly help assuage these concerns. At City National Rochdale, we implement three levels of portfolio risk management specifically.

PORTFOLIO DESIGN. We undertake an extensive review of each portfolio’s holdings at the portfolio design level and determine how they may fit within an overall target portfolio, which stocks or funds to hold or sell, and how to manage the tax impact.

DYNAMIC ASSET ALLOCATION. We leverage fundamental and economic research to establish dynamic risk management parameters to reduce equity exposure when necessary. Utilizing our proprietary capital markets outlook with economic and financial models, we tactically adjust financial allocations and exposure to mitigate and manage risk. Most investment managers stop here.

PERSONALIZED DOWNSIDE RISK MANAGEMENT. City National Rochdale takes risk management a step further by understanding a client’s risk tolerance, which establishes an individual client’s downside limits or risk “budget.” In times of abnormal negative market activity, these circuit breakers are activated to reduce exposure to risky assets, such as certain stocks. We actively continue communication with the client and continually evaluate whether the risk of each portfolio is consistent with the client’s risk tolerance and determine if additional steps are required.

High-net-worth clients have come to expect sophisticated risk management with their investment portfolios. A forward-thinking investment manager uncovers a client’s full range of exposure and evaluates it based on the client’s personal tolerance for risk. Because these types of risk management techniques can help a client mitigate losses during severe market turndowns, the cash raised as a recession precaution can then be reinvested when risk subsides. Note that there is no guarantee that these techniques will prevent loss of investment capital.

High-net-worth clients typically dislike losses more than they like gains.

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Important Disclosures

The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. This presentation is not an offer to buy or sell, or a solicitation of any offer to buy or sell, any of the securities mentioned herein.

Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results and are based primarily upon a hypothetical set of assumptions applied to certain historical financial information. Certain information has been provided by third-party sources, and, although believed to be reliable, it has not been independently verified, and its accuracy or completeness cannot be guaranteed.

Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this document and are subject to change.

As with any investment strategy, there is no guarantee that investment objectives will be met, and investors may lose money. Returns include the re¬investment of interest and dividends. Investing involves risk, including the loss of principal. Diversification may not protect against market loss or risk. Past performance is no guarantee of future performance.

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