When developing long term investment strategy for its portfolios, Capes approaches the problem from both the "top" and the "bottom". It considers major macro-economic and political trends or factors that may affect security valuations generally or particular industries. Such strategic decisions will impact asset allocation and sectors chosen for investment emphasis. Capes also identifies particular companies or industries that seem to represent excellent value because either they are temporarily out of favor or our assessment of earnings potential may be greater than that accorded by the market.
Our investment strategies tend to limit excessive turnover in client portfolios. However, where appropriate, we are prepared to trade more actively and aggressively, even utilizing margin to achieve client goals.
Capes prefers to invest in leading medium to large capitalization companies. Our fundamental analysis of companies is primarily based on research prepared by others, but at times might include discussions with company representatives on critical points. In our review process we may use annual reports, research reports, offering prospectuses, and financially oriented media of all types.
Bonds in most client portfolios are held either to produce income or reduce the overall volatility of the portfolio or both. Nonetheless, we are active bond managers, managing our portfolios within client risk and tax constraints as well as our strategic view of interest rates. We prefer to invest in top quality bonds to minimize credit risks, but when clients permit we are prepared from time to time in small amounts, to invest in lower rated, higher risk bonds for greater total return.
Without trying to determine the precise level of future interest rates, we focus on the long term direction of rates, any expected significant shifts in the structure of the yield curve, and at appropriate times the question of whether an inflection point and change of direction has been reached.
We seek value among top quality bond sectors and types and will structure a portfolio based on client needs and opportunities in the market place. As values shift we are prepared to swap current holdings for better yield, safety, or potential gain. Our bond portfolios are invested in tax exempts, Treasuries and government agencies, and top quality corporate issues. Sources of information are similar to those used for stocks.
When the firm, or its stockholders, buy or sell securities also recommended to clients, orders are placed simultaneously, if not first, for the client, after taking into consideration the tax implications, available cash and particular goals of the client. Cash availability may cause timing variances in dates of executions as will price changes that might cause different tax results depending on the cost basis of a particular security for different accounts.
All investment supervisory accounts are reviewed quarterly by individuals of the firm bearing investment advisory responsibilities, and at such other times as the status of securities held may become "sell" candidates, or funds become available for new commitments. Periodic written reports to clients may include itemization of transactions during the period regarding realized and unrealized gains and losses, receipt of dividends and interest, commissions and management fees paid, and deposits to and withdrawals from the account.
The firm generally has authority from the client with respect to the selection and amount of securities to be bought or sold and the commission rates to be paid. The basic custodian to be used is determined with specific client consent.
The investment policy established for each account may stipulate limitations with respect to asset allocation and/or commitments to one or more types of securities, credit quality and/or percentage or dollar maximums as might be applied to categories of securities as well as specific issues.
Factors considered in selecting brokers include customer preference, if any, custody and execution services and costs, research and market making capabilities. The reasonableness of commissions must relate to the value of these factors plus the degree of trading volume given the broker.
The quality of securities research and efficient market executions are values for which clients may pay higher commissions. Research may be used to service all of the firm's accounts, but since research comes from multiple sources, all accounts receive all the benefits.
Client transactions generally are executed with the broker providing custody of client securities, which often is a broker providing research services. Where there is more than one broker for the client, the execution might turn on the advantage to the client that could arise from research, market making expertise, commission level, or other factors. Generally, custody and commission structures for managed accounts are competitive. The firm has no arrangements whereby it is paid cash by or receives some economic benefit from a non-client in connection with giving advice to clients, nor does the firm directly or indirectly compensate any person for client referrals
Investment Advisory Fees are a percentage, up to 1% annually, of the market value of assets under supervision. Fees are charged quarterly in advance and are based on the market value of the account on the last day of the preceding quarter. In the case of a new account starting mid-quarter, the first bill will arrive at the beginning of the next quarter reflecting two amounts: first, a bill based on the initial value of the portfolio pro-rated for the portion of the quarter during which the portfolio was under supervision; and secondly, a bill for the first full quarter looking forward, based on the value of the portfolio at the end of the prior quarter. (Please see our Disclosure Brochure Form ADV and/or additional information about Capes Capital Management, Inc. is also available on the SEC website at www.adviserinfo.sec.gov.)
Currently fees are being charged as follows:
• Up to 1% on all new equity accounts and total return accounts (accounts that may be invested 100% in bonds or stocks or any combination thereof at the discretion of the manager).
• Up to1% on stocks and 0.5% on bonds for new balanced accounts;
• Up to .5% for purely bond accounts.
While we seek a minimum account size of $500,000, producing a $5,000 annual minimum fee at 1%, the account size and fee might be waived or negotiated at certain times. All engagements may be terminated by written notice from either party and any unearned portion of fees beyond the month of notice will be refunded.
Monroe Capital Partners, LLC (MCP) is an affiliated registered investment advisory firm. MCP's Form ADV Parts 2A & 2B are available upon request.
© Capes Capital Management, Inc. 2017. All rights reserved.
Capes Capital Management, Inc.
Towne Pavilion Center I
2101 Parks Avenue, Suite 103
Virginia Beach, VA 23451
Monday - Friday: 9:00am - 5:00pm
Saturday & Sunday: By Appointment