Private Investment Partnerships
MSCM, LLC is a registered investment advisor that formerly managed private investment partnerships (aka hedge funds) for qualified individuals and institutional investors. The firm was originally founded to deploy a specific options based absolute return investment strategy within an investment partnership structure. Having lead investors through a number of chaotic market periods, we were asked to offer expanded services beyond this core strategy. This growing demand also drove us to move from the private investment partnership structure to offering all of our strategies in separately managed accounts instead. We employ the same level of discipline and analysis to all of our strategies.
Separately Managed Accounts
Separately Managed Accounts (SMAs) allow us the ability to work with investors in a broader, non-strategy specific context, thus customized to their own personal situation. The structure allows us to leverage our investment expertise for a client’s entire portfolio, while also offering them the transparency and custodial security that they seek.
Covered Call Overlay
McElhenny Sheffield has focused on capturing the time value of option premium since the firm’s inception. When an investor sells a ‘covered call’, they are simply leasing someone the right to buy their equity holding at a set price within a pre-defined period of time. No incremental risk is added to the equity holding since the investor is merely committing to sell their existing stock at a set price – they are simply forgoing any potential upside above the covered call level in return for a pre-defined premium payment today. MSCM offers an approach whereby covered calls are sold at or below the current equity levels – focusing on capturing the call premium as a means to drive returns in lieu of a directional bet on the equity itself. Investors can either have MSCM select the underlying equities that meet our criteria for covered call management or we also accommodate investors that have existing positions and simply wish to add custom covered call overlay management to enhance yield and dampen volatility of their existing portfolio.
The goal of this approach is simple – to capture a steady total return through ownership of large multi-national companies paying strong yet sustainable dividend yields. In other words, we invest in companies that we would want our children to own. Preferred stock & bond positions may be utilized in addition to common stock depending upon market conditions. The firm also leverages its deep options expertise to enhance yields via selling covered calls, utilizing cash secured puts to gain more beneficial entries, and for hedging purposes when warranted. Many investors come to us with existing dividend holdings – our boutique approach allows us to incorporate our selections opportunistically into existing portfolios in a customized manner. purposes.
MSCM understands that many investors are seeking to increase the income they are receiving on their assets. Bonds do not appear to be a good option currently because of their low yields. Since most outstanding bonds are currently trading at a premium to ‘par’, they are almost certain to lose money at expiration (bonds mature at par). Also, investors may not want the sort for fluctuation in value that can come with investing in dividend paying common stocks. Preferred Income thus focuses on capturing a stable income by utilizing only lower volatility ‘preferred stocks’. Preferred stock holders maintain a senior position to common stock holders.
While common stock dividends can frequently get cut, preferred stock dividends are cut much more rarely – and when preferred stock dividends are cut, those cuts often have to be made up in full in the future before any additional common stock dividends can be paid. MSCM targets preferred stocks paying dividends in the range of 5-7.5%.
Concentrated Position Management
Many current or former public company executives end up with an over-weighting in one specific security due to option conversions, restricted stock units, etc. Often either due to an affinity for the company, sense of vested interest in success, or for tax considerations, the investor does not want to sell the stock to diversify. Measures can be taken to limit risk and increase returns without selling the underlying stock position.
Our extensive experience in the options arena allows us to support sophisticated professional trading strategies and deliver them to our clients. MSCM maintains accounts with individual investors and institutions alike. We welcome sub-advisory roles to other Registered Investment Advisors (RIAs). We can provide sophisticated expert asset management capabilities that have the ability to have a material positive impact to returns, while honoring the relationship our partners (RIAs) maintain with their clients.
MSCM maintains multiple top tier custodial choices for our investors: