Equities lie at the core of many of our portfolio allocations. Historically, equities have outperformed all other asset classes over long time periods. Moreover, after adjusting returns for taxes and inflation, investing in stocks has historically been an important means of generating significant capital appreciation. However, there are many ways to manage an equity portfolio; a combination of strategies typically produces superior results.

The Wealth Management Group is careful to customize solutions for each client, with a common theme at the core of all such strategies. Our approach is to minimize losses by reducing the portfolio's level of risk in relation to the market while simultaneously seeking investments that perform better than various market standards or indices.

More specifically, this means that we minimize losses by reducing the overall beta within the portfolio construction while simultaneously adding alpha managers that can exploit inefficiencies in those market segments. This normally results in a much lower standard deviation and a lower down market capture ratio while keeping the portfolio in the optimal location on the efficiency frontier.

At United Bank, we may employ any of the following strategies when appropriate for a specific client:

• Active Management - An investment process that attempts to add significant return above a benchmark. This process can be subdivided into two categories: fundamental management and quantitative management. Fundamental managers rely on research and analysis produced by teams of equity analysts. In contrast, quantitative management employs the use of various statistical models to select securities.
• Passive Indexing - The advantages of passive indexing (investing in a well-diversified portfolio to represent a broad-based market index) are low cost, high tax-efficiency and elimination of underperformance risk in relation to the market. Passive indexing works best in market segments such as U.S. Large Capitalization Core, where research is widely available and where it is difficult for active managers to outperform a benchmark.
• Enhanced Indexing - The objective of enhanced indexing is to exceed the total return performance of some pre-determined index. Managers of enhanced index portfolios use either a disciplined statistical process in an attempt to outperform the benchmark or simply utilize tax-loss harvesting techniques to deliver a higher after-tax return.

Our approach of total diversification does not end with the global asset allocation; we drill deeper into each asset class. With respect to equities, we seek to have exposure to the following styles:

• Large Capitalization Core
• Large Capitalization Value
• Large Capitalization Growth
• Small Capitalization Core/Growth
• Small Capitalization Value

In most cases, we seek to diversify further by selecting skilled managers adept at analyzing markets outside of the United States. Depending on the overall risk characteristics of the individual allocation, we may include exposure to:

• Developed International Equity
• Emerging Markets Equity