First Midwest Investments1
The Investment Management team at First Midwest Bank uses a process called Primary Equity and Risk Limited Strategies (PEARLS) when managing individual securities for selected asset classes. The primary equity strategies seek to outperform assigned benchmarks for each asset class. Our fixed income (bond portfolio) strategies focus first on limiting risk and preserving capital for a secondary goal of income generation.
Equity Selection
The primary equity strategy continually measures and carefully controls stock selection. Our investment professionals use multiple factors to determine which equities are included, and all equities are reviewed using a dynamic weighting scheme to emphasize factors that are working best at any given time. Our quantitative approach identifies stocks with both favorable valuations and earnings expectations that are expected to outperform their peers.
We are able to minimize the risk of our equity portfolios by matching certain characteristics of the appropriate equity benchmark, including sector and industry weights and average market capitalization of stocks in our portfolios. We are able to produce returns divergent from the benchmark because of the individual stock issues that are selected. The primary equity strategy adjusts the process for each of the target benchmarks.
For more information on our approach to developing equity portfolios, contact a First Midwest Trust Officer today.
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Fixed Income Selection
The risk limited fixed income security selection in PEARLS is based on quality and liquidity requirements. Bonds considered for purchase will generally be high quality (rated "A" or better by Moody's and/or Standard and Poor's). We primarily invest in large, general market issues to provide liquidity. PEARLS also blends various maturities, with the mix dependent on the yield curve and interest rates. Certain corporate bonds and/or Treasury securities will be used, depending on opportunities presented by pricing differentials between or among these types of securities.
Through the use of intermediate-term (1 to 10 years) securities, PEARLS is designed to provide an attractive, risk-adjusted return. PEARLS is not a buy and hold strategy. Securities will be actively traded to ensure we are generating the returns we want while keeping our risk exposure low. Some of the reasons we trade securities include a shift in the interest rate outlook, or a change in the yield curve. We continuously monitor the quality of fixed income investments and the macro economic trends that affect them.
To learn more about our fixed income strategies, and whether or not they are right for your portfolio, contact a First Midwest Trust Officer today.
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Blended Portfolio
Combining several of the primary equity portfolios with the risk limited fixed income portfolios is an effective way to create a diversified asset allocation. The open architecture platform used by First Midwest Bank also allows for the inclusion of additional investment strategies when PEARLS does not meet all the client's investing needs.
A diversified approach to selecting investments for client portfolios may result in more stable performance. To find out more information about our approach to blended portfolios, contact a First Midwest Trust Officer today.
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Tax Efficiency
Tax efficiency is important to us because it is important to you. As the saying goes, it isn't how much you make, but how much you keep. The decision to take capital gains is always weighed against the current tax laws, your financial situation and account performance.
To gain a greater understanding on how we work with clients to make their portfolios tax efficient, contact a First Midwest Trust Officer today.
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