Author Archive for Malena Lott

Heritage Team Runs in OKC Memorial Marathon

 

April 24th marked tIMG_8577he 16th Oklahoma City Memorial Marathon with nearly 25,000 runners of all ages in the kids, 5K, Half Marathon, Relay and Marathon, and Heritage proudly participated. In addition to the runners, hundreds of volunteers and businesses help along the course and support the runners. The race begins at the site of the Memorial in downtown OKC.

The Heritage 5 person relay team included Kenny Brown, Joni Guy, Jeff Asher, and Jennifer Pellow. Unfortunately Rusty Riggs developed a stress fracture while training so her friend Karreen stepped in to run her leg.

Our 2016 #OKCMarathon runners.

Three Heritage employees completed the Half Marathon: Matt McGuire, David Luke and Megan Bowers. We thank them for running and everyone in the community for supporting this race and all it stands for: #runtoremember.

Heritage marketing coordinator Jennifer Pellow, who ran in the relay, recounts her experience. “I was moved seeing all the fireman doing the half marathon in full gear, respecting all the fireman who were on the scene to help during the bombing. You know that was a huge challenge but, they seemed grateful to have that honor.”

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“I also loved all the kiddos with their hands out as we ran by! It made my heart happy to be running,” she said.

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Our 2016 #OKCMarathon runners.

 

 

INVESTMENT OUTLOOK – 2nd Quarter Heritage Market Brief

SECURITY SELECTION COMMITTEE VIEWPOINTS

Second Quarter 2016

THEMES

  • Despite a number of positive economic releases, the Fed made an unsurprising decision in March to leave the Fed Funds rate at a target of 0.25%-0.50%, citing spillover risks from weakness in global economic growth.
  • The U.S. labor market continues to improve as 215,000 jobs were added in March, and the labor force participation rate finally made a move in the right direction to 63% from a cycle low of 62.4% in September 2015.
  • Despite recent interest rate increases, the FOMC remains committed to gradual increases while balancing long-term goals of maximum employment and inflation of 2%.
  • While average hourly earnings increased 2.3% year-over-year, Fed policy makers believe increases of 3%-4% would have to be seen before materially impacting prices.
  • The U.S. consumer remains healthy with real disposable income increasing 2.9% year- over-year; however, this has not yet translated to a considerable increase in spending.
  • Thin inventory and strong demand continue to push housing prices higher, with many markets rising to pre-financial crisis levels.
  • The March ISM Manufacturing Index reversed a contractionary trend in place since September 2015 as it posted a reading of 51.8, driven largely by new export orders.
  • Inflation remains below target as indicated by the year-over-year Core Personal Consumption Expenditures Index (PCE less food and energy) reading of 0.96%.
  • The Fed’s median forecast for 2016 GDP growth is 2.4%; however, this may prove difficult if consumers continue to save increased disposable income rather than increase spending.

SECURITY SELECTION COMMITTEE VIEWPOINTS SECOND QUARTER 2016

HERITAGE TRUST COMPANY

  • While interest rates remain range bound, individual bonds held to maturity should continue to provide downside protection.
  • It is likely that volatility will continue as the Federal Reserve is expected to continue raising interest rates, S&P 500 stocks no longer appear cheap relative to earnings, and revenue growth remains challenging.
  • Emerging market economies remain at risk to rising U.S. interest rates; however, the asset class should be additive to long-term returns as demographics are favorable and the sub- asset class remains attractively valued at less than 11 times next year’s estimated earnings.

ASSET ALLOCATION

Even after the Federal Reserve raised interest rates for the first time in nearly a decade in December 2015, we expect the central bank to remain committed to an accommodative monetary policy which should keep current yields low relative to historical levels. Thus, we believe an overweight in stocks relative to bonds is appropriate from a risk/return perspective. Our focus on valuations has led us to believe that U.S. small-cap stocks are becoming more attractive after underperforming their large-cap counterparts for the last two calendar years. We are still maintaining our underweight to U.S. small-cap equities
but to a lesser degree than over the past couple of years. Despite weaker growth outside the U.S., we remain disciplined and maintain a strategic allocation to foreign markets, especially emerging markets where valuations appear much more attractive. Foreign small-cap stocks should be additive to the portfolio return in the long-run as small-cap companies tend to enjoy higher earnings and cash-flow growth relative to large-cap companies. Since, much of our small-cap exposure is in European small-cap companies, European accommodative policy should prove to be beneficial in the long-run as well. While our fixed income exposure remains underweight due to the current risk/return profile, we continue to purchase individual fixed income securities as bonds play a vital role in the portfolio.

We believe alternative exposure remains vital to portfolio diversification. While
we maintain a position in U.S. REITs, we have taken the opportunity to trim where necessary due to our belief that the asset class has potentially reached overvalued territory after outstanding growth throughout the recovery.

These views represent the opinion of the Security Selection Committee which are based on qualitative as well as quantitative factors. These quantitative factors are primarily driven by valuation research which then forms our subjective assessment of the relative attractiveness of asset classes and subclasses over a 3- to 5-year time horizon.

Takeaway: 10 Money Tips Millennials Need To Survive In 2016

A new regular feature on our Heritage blog is Takeaway, our perspective on articles recently published that we found interesting or of note to share with our readers. While our commentary is in no way an endorsement of the whole piece, our aim is to increase the dialogue around money, investing and family legacies. 

Article:

10 Money Tips Millennials Need To Survive In 2016

Article by Jennifer Colonia, Forbes.com

Takeaway by Kenny Brown, Heritage Trust

The most important takeaway from my perspective is Money Tip #9 “Never Lose Money — flameYou Can’t Afford It.”  It is not uncommon for me to get asked, “Any hot stock tips?”  Yet when I ask, “What is the plan with the money they would like to invest?”  I often hear, “I just want to make money.”  The most successful business owners and investors I know have an obsession with not losing money. In fact, Warren Buffett’s investment rules are quite simple, “Rule No. 1 : Never lose money. Rule No. 2 : Never forget Rule No. 1.”

To read the full piece with more tips like “Make your Dollars Do Pilates” and “A Plan B is Absolutely Necessary”, click on the article link above.

Are You Guilty of 401(k) Sins?

by Garrett Johnson, Heritage Institutional

Recently our team ran across this insightful article  by Thomas Scarlett on the Seven Deadliest 401(k) Sins You Can Commit. I like what he says about not chasing returns and cutting back on living expenses to increase your contribution level. Remember a lot of advice can be boiled down to simply taking the time to stay on top of your finances such as Scarlett’s “sin” of not keeping your 401(k) with a former employer. Awareness and action goes a long way. Scarlett also tells us:iStock_000041321680_small

Withdrawing Funds Before Retirement

It can be tempting to look at the pile of money you’ve accumulated already and dream about tapping into it before you reach retirement.

Recent tough economic times have certainly increased that temptation for many, especially those who have seen the value of their homes fall sharply.

But raiding your retirement fund should be an absolute last resort. Even if you can demonstrate a hardship, the Internal Revenue Service will force you to pay a 10% penalty on the amount withdrawn. If you take out $20,000, $2,000 of your savings is gone for good.

If you are looking for even more resources that simplify retirement, for young and old readers alike, I highly recommend the book Mock Retirement by Peter Dunn. I recently read this book and although I am several years away from retirement (hopefully), it allowed me to think more strategically about my own retirement and gave me insight on what I should be doing now to get to where I want to be when that day comes. Mr. Dunn takes a deeper look into the same aspects of retirement mentioned by Mr. Scarlett; topics such as how much money should I be contributing?, healthcare, & social security, and most importantly, your lifestyle.

Heritage Market Brief – April

Each month, our Heritage Investment team publishes a market brief to provide an overview of the major factors influencing the US economy, including a summary of key sectors and the current positives & challenges.

Click here for the April 2016 update.

Here are some key highlights:

POSITIVES

  • Core inflation, which excludes food and energy, recently reversed its downward trend as higher housing costs, health care expenses, and clothing prices drove inflation 40 basis points higher over the last six months to 1.7%
  • Labor markets continue to improve as March payroll employment rose 215,000, driven by construction, business & professional services, and retail
  • A 4%+ decline on the dollar index during the first quarter appears at least partially responsible for the recent boost in the ISM new orders index as new export orders surged 5.5 points
  • While the consumer savings rate of 5.4% is standing at a 3-year high, increasing consumer sentiment and confidence suggests this defensive behavior may reverse course

CHALLENGES

  • While oil prices gained 50%+ during the first quarter, the battle for market share and current inventories suggest low oil prices will likely remain; this is good for the typical U.S. consumer, but oil dependent economies will continue to face near-term pressure
  • Even with improving labor markets and increased inflation pressure, the Fed appears to be taking a slower pace to interest rate normalization as it remains cautious on spillover effects from global economic and financial uncertainty
  • A recent decline in vehicle sales of 5.1% to an annualized rate of 16.6 million may suggest that a weak March retail sales report is just around the corner

Book of the Month: The Rationale Optimist

Each month Heritage recommends a read from one of our staff — a book we feel our readers and clients will enjoy. Our April recommendation comes from Matt McGuire, President, Heritage Institutional, who says this read showcases why the world is getting better and our role in it.

The Rationale Optimist: How Prosperity Evolves by Matt Ridley41MLwBkcIKL._SX330_BO1,204,203,200_

From the publisher:

Life is getting better—and at an accelerating rate. Food availability, income, and life span are up; disease, child mortality, and violence are down — all across the globe. Though the world is far from perfect, necessities and luxuries alike are getting cheaper; population growth is slowing; Africa is following Asia out of poverty; the Internet, the mobile phone, and container shipping are enriching people’s lives as never before. The pessimists who dominate public discourse insist that we will soon reach a turning point and things will start to get worse. But they have been saying this for two hundred years.

Yet Matt Ridley does more than describe how things are getting better. He explains why. Prosperity comes from everybody working for everybody else. The habit of exchange and specialization—which started more than 100,000 years ago—has created a collective brain that sets human living standards on a rising trend. The mutual dependence, trust, and sharing that result are causes for hope, not despair.

Reviews:

This bold book covers the entire sweep of human history, from the Stone Age to the Internet, from the stagnation of the Ming empire to the invention of the steam engine, from the population explosion to the likely consequences of climate change. It ends with a confident assertion that thanks to the ceaseless capacity of the human race for innovative change, and despite inevitable disasters along the way, the twenty-first century will see both human prosperity and natural biodiversity enhanced. Acute, refreshing, and revelatory, The Rational Optimist will change your way of thinking about the world for the better.Ridley writes with panache, wit, and humor and displays remarkable ingenuity in finding ways to present complicated materials for the lay reader.” — Los Angeles Times

In a bold and provocative interpretation of economic history, Matt Ridley, the New York Times-bestselling author of Genome and The Red Queen, makes the case for an economics of hope, arguing that the benefits of commerce, technology, innovation, and change—what Ridley calls cultural evolution—will inevitably increase human prosperity. Fans of the works of Jared Diamond (Guns, Germs, and Steel), Niall Ferguson (The Ascent of Money), and Thomas Friedman (The World Is Flat) will find much to ponder and enjoy in The Rational Optimist.

Learn more about the book here. 

Professional Perspectives: Business Succession Planning

by Greg Jones CPA, CVA, Partner,  Eide Bailly LLP

The vast majority of businesses in the United States are closely held, family businesses. As a Certified 6692Public Accountant in public practice, I have had the opportunity to work with hundreds of individuals who own and work in a closely held business. I’ve found that the personalities of owners vary. Some are entrepreneurs who have made (or lost) more money than I will see in a lifetime. Others are conservative, never borrowing money and preferring to take the safe road rather than risk everything. Regardless of their style, each successful business owner will probably ponder a question similar to this one: “Who will run my business when I am gone?” If you are that business owner, this question may keep you awake at night. It is a question in which the answer is usually unclear. Fortunately, there are solutions; the best strategy includes designing a succession plan.

Before a plan can be put in place, I usually ask my clients a few basic questions:

  • What role does your business play in your family’s life? Possible answers may include:
    • Providing income
    • Providing employment for family members or long-time employees
    • Providing an opportunity for family members to work together
    • Providing a family identity, such as a legacy from an earlier generation
  • What would you like to see happen to your business in the future? (To whom do you want to transfer the business to?)
  • What is the annual after-tax income you want during retirement (in today’s dollars)?
  • As it relates to your business, what would you like to see happen to your family in the future?
  • In your absence, is the company positioned to run without you?
  • How much time do we have to execute a plan? (What is your desired retirement date?)

Once the above questions are answered, an owner will generally know whether the business will be transferred to a third-party, key employees or family members.

A third-party (perhaps a competitor) can simply purchase the business from the owner. This transaction is simple and typically efficient. The sale can be structured to achieve the selling owner’s goals while limiting the tax burden.

In some cases, a business owner may want to transfer ownership of the company to a key employee or group of employees. This strategy can yield wonderful results if the management team of the company is strong enough to manage the business without the owner. A shortfall is that the key employee(s) may lack the funds to buyout the owner; the owner may end up financing much of the buyout.

In the case of a desired transfer to family members, harmony among the family is an important factor. It is not uncommon for one child to work in the family business while his/her siblings pursue other careers. This is a difficult situation and one that cannot be ignored. Too often I see a family business split several ways when the owner dies. The owner may know one child should receive controlling ownership in the company, but wishes not to upset the rest of the family by creating a succession plan. In a recent case, the son of a business owner, who already managed the business prior to his father’s death, was left with a minority interest in the company. Thus, he was forced to consult his siblings on every major decision of the company, even though those family members knew nothing about the business.

An important component to a business succession plan is to include it as part of a well thought-out and executed estate plan. Gifts of stock, for example, may be part of the succession plan and a part of the overall estate plan. Coordinating the business succession plan with the estate plan is critical.

Family meetings are always a good place to begin discussions about business succession. Additionally, open up communication with key employees and find out their goals. Find trusted advisors to help you work through the business, financial and emotional aspects of a business transition. The sooner you develop and implement a plan, the better the chances that your family and business will be successful for years after your departure.

Greg has more than seven years public accounting experience and provides tax planning and preparation services to a variety of clients, including oil and gas companies, manufacturers, professional service firms and closely held family groups. As a Certified Valuation Analyst, he provides business valuation services for clients in connection with estate planning, buy/sell agreements, partner disputes and employee stock ownership plans. Learn more about Greg here. 

Heritage Book Review : PREPARING HEIRS

This month’s book recommendation comes from Nancy Ellis, Chairman Emeritus and Member of the Board of Directors.

Nancy selected:

Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values

“Preparing Heirs is a road map for families that desire to build a successful family business that will go into all generations of business,” said Ellis.

From the publisher:41tEVFJiKTL._SX300_BO1,204,203,200_

Preparing Heirs discloses the surprising findings from the authors’ research into the legacies of 3,250 wealthy families. With extraordinary insight, they reveal what the relatively small number of successful families had in common-how they achieved and maintained family harmony, and ensured the smooth transition of their wealth to well-adjusted heirs. They also warn of the wide range of factors that cause the majority of wealthy families to fail in their transition. Preparing Heirs offers clear, concise, well-organized, and easy-to-follow instructions that will enable you to evaluate your plan for transitioning family wealth. Preparing Heirs is an assessment tool that can be used in conjunction with the services of qualified professionals such as attorneys and accountants. It addresses the major causes for the 70% failure rate in estate transitions, which lie within the family itself and are within the family’s control. This book can help you develop a plan to transmit the family values underlying the accumulation of wealth and prepare your heirs to be good stewards and thoughtful administrators of that wealth.

To find out more about the book, click here. 

5 Ways to Show Your Financial Plan Some Love

Valentine’s Day is typically about roses and chocolates, but nothing is lovelier than a beautiful investment strategy. Below are five things a savvy investor does to show their financial plan some love. womanheart

1. Stay Curious

Whether you manage your own investments or pay someone to manage them, be informed. Every person should have enough understanding of financial nomenclature to ask educated questions regarding his or her investment accounts, stocks, bonds, mutual funds, etc. Also, be sure to review your statements. It is very important to keep up with your financial position. You never know when you might come across something in your statement that needs clarification. If you do have questions about your financial statement, financial position, or performance, do not be afraid to ask questions. Being inquisitive is key to understanding your financial position, and it is likely you will learn in the process. Your financial advisor should always be willing to provide answers to your questions in terms you can understand, as well as provide you with your financial statements. If your advisor is being evasive, proceed with caution.

2. Control Expenses
Remember that fees, trading costs, and timing of tax gain/loss recognition are the only controllable components of investment returns. Your goal should be to maximize your NET return after subtracting trading costs, management fees, taxes and inflation. If possible, investments should be held for at least a year to recognize favorable capital gain rates, and if you do not know how much you are paying in fees, ask! If your financial advisor leads you to believe you are not paying a fee, find out how they are paid. Is it through 12b-1 fees, loads or commissions? If so, ask yourself if that advisor is truly working in your best interest or working in their own best interest by making investments that increase their commission.

3. Increase Your Savings
At the beginning of every year, you should make it a point to increase your retirement plan contributions and/or personal savings.  Don’t just stop at the amount your employer will match, and if applicable take advantage of Roth options.  While it seems simple, most people do not actively follow a budget and instead, think they intuitively know what they spend and where. But by being intentional about your family’s budget, it will ensure you can accomplish your long-term goals and sets a good example for your children and grandchildren. Make sure you talk with them about the savings process and help pass on these important disciplines.

4. Rethink Charitable Giving
If your individual stocks saw significant capital appreciation last year and you are planning on making a gift to a charity this year, consider making a gift of those shares of stock.  By gifting appreciated stock, you will get the full tax deduction, without having to sell and recognize capital gains.  This allows the charity to receive more, and you’re able to give (and deduct) more.  Also, if you are 70 ½ and are required to take a distribution from your IRA or retirement plan, that amount can also be gifted directly to a qualified charity without recognizing the income.  Contact the business development officer at your favorite charity to find out if this is an option.

5. Talk About Death
Finally, no one likes to talk about the inevitable, but you need to make that a priority this year. That’s what investment is all about: taking care of you and yours. Talk with your family about your estate plans. Take time to create a will or revocable living trust if you do not already have one. Be sure to check the beneficiaries listed on your IRAs, 401(k)s, payable-on-death accounts, and insurance policies. Has someone preceded you in death, been married or divorced? Update the beneficiaries on those accounts if necessary, as they are not subject to your will or probate. Taking time to think through and talk about these issues with your loved ones will ensure your wishes are carried out.

Happy Valentine’s Day from our family to yours. We love serving you.

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INVESTMENT OUTLOOK – First Quarter 2016 Heritage Market Brief

SECURITY SELECTION COMMITTEE VIEWPOINTS

First Quarter 2016

THEMES

  • The Federal Reserve raised rates by 25 basis points in December 2015 for the first time in nearly 10 years, signaling confidence in the U.S. economy.
  • Despite recent interest rate increases, the FOMC remains committed to gradual increases while balancing long-term goals of maximum employment and inflation of 2%.
  • Inflation remains below target as indicated by the year-over-year core Personal Consumption Expenditures Index (PCE less food and energy) reading of 1.33%.
  • The U.S. economy added 292,000 jobs in December, and the unemployment rate remained unchanged at 5%.
  • While wage inflation moderated some in 2015, wages still advanced a respectable 4.5%.
  • Consumers appear healthier as year-over-year real disposable income increased 3.1%, and consumers are saving income at a 3-year high of 5.5%.
  • While consumer health has improved, declining consumer confidence from 99.1 in October to 90.4 in November has kept consumers from spending discretionary income saved from lower oil prices and higher wages.
  • In November 2015, manufacturing entered contraction territory for the first time in 36 months as the strong dollar continues to weigh on exports.
  • While interest rates remain range bound, individual bonds held to maturity should continue to provide downside protection.
  • It is likely that volatility will continue as the Federal Reserve is expected to continue raising interest rates, S&P 500 stocks no longer appear cheap relative to earnings, and revenue growth remains challenging.
  • Emerging market economies remain at risk to rising U.S. interest rates; however, the asset class should be additive to long-term returns as demographics are favorable and the sub- asset class remains attractively valued at under 11 times next year’s estimated earnings.
  • Structural unemployment as well as a slow recovery from a severe recession may be playing a key part in the lowest labor force participation rate in nearly 40 years.

ASSET ALLOCATION

Even after the Federal Reserve raised interest rates for the first time in nearly a decade in December 2015, we expect the central bank to remain committed to an accommodative monetary policy which should keep current yields low relative to historical levels. Thus, we believe an overweight in stocks relative to bonds is appropriate from a risk/return perspective. Our focus on valuations

has led us to believe that U.S. small-cap stocks are becoming more attractive
after underperforming their large-cap counterparts for the last two calendar years. We are still maintaining our underweight to U.S. small-cap equities
but to a lesser degree than over the past couple of years. Despite weaker growth outside the U.S., we remain disciplined and maintain a strategic allocation to foreign markets, especially emerging markets where valuations appear much more attractive. Foreign small-cap stocks should be additive to the portfolio return in the long-run as small-cap companies tend to enjoy higher earnings and cash-flow growth relative to large-cap companies. Since, much of our small-cap exposure is in European small-cap companies, European accommodative policy should prove to be beneficial in the long-run as well. While our fixed income exposure remains underweight due to the current risk/return profile, we continue to purchase individual fixed income securities as bonds play a vital role in the portfolio.

We believe alternative exposure remains vital to portfolio diversification. While
we maintain a position in U.S. REITs, we have taken the opportunity to trim where necessary due to our belief that the asset class has potentially reached overvalued territory after outstanding growth throughout the recovery.

These views represent the opinion of the Security Selection Committee which are based on qualitative as well as quantitative factors. These quantitative factors are primarily driven by valuation research which then forms our subjective assessment of the relative attractiveness of asset classes and subclasses over a 3- to 5-year time horizon.

INVESTMENT OUTLOOK – Fourth Quarter 2015 Heritage Market Brief

SECURITY SELECTION COMMITTEE VIEWPOINTS

Fourth Quarter 2015

THEMES

  • Despite a 5.1% unemployment rate and second quarter GDP revision up to 3.9%, the Federal Reserve did not raise interest rates on September 17th as the committee feared higher U.S. interest rates would further strengthen the U.S. dollar and cause further weakness among emerging markets
  • During the third quarter, the market experienced its first correction in four years upon heightened concerns surrounding China’s slower expected economic growth, the strong U.S. dollar, weak oil prices, and reduced capital spending in response to the former
  • While corporate credit spreads have increased over the last 6 months, the current default rate of 2.3% remains relatively low compared to the historic default rate of 4.5%; therefore, we currently view this as an opportunity to buy corporate debt where necessary and appropriate rather than viewing it as an economic health warning
  • U.S. auto sales soared 16% in September and are on track to reach a 10-year annualized high of 18.17 million units
  • Housing remains strong with new home sales at the highest level since February 2008
  • U.S. consumers remain healthy as signaled by a 3.2% year-over-year increase in disposable income
  • With September nonfarm payroll additions of only 142,000 relative to an expected 200,000, continued global growth uncertainty, and inflation levels below 2% with no sign of increasing as indicated by TIPs and commodity prices, it is very likely the Fed will postpone its first rate hike until 2016
  • While interest rates remain range bound, individual bonds held to maturity should continue to provide downside protection
  • It is likely that volatility will continue as long as the market remains concerned about the timing of rate hikes and global economic health
  • Emerging market economies remain at risk to rising U.S. interest rates; however, the asset class should be additive to long-term returns as demographics are favorable and the sub- asset class remains attractively valued at just 10.7 times next year’s estimated earnings.
  • Structural unemployment as well as a slow recovery from a severe recession may be playing a key part in the lowest labor force participation rate in 37 years.

ASSET ALLOCATION

We expect the central bank to remain committed to an accommodative monetary policy which should keep current yields low relative to historical levels. Thus, we believe an overweight in stocks relative to bonds is appropriate from a risk/return perspective. Our focus on valuations has led us to believe that U.S. small-cap stocks are rich relative to historical long-term averages. Therefore, we have taken the opportunity to trim from U.S. small-cap equities in order to lock-in gains and increase our exposure in asset classes that are more attractively valued. Despite weaker growth outside the U.S., we remain disciplined and maintain a strategic allocation to foreign markets, especially emerging markets where valuations appear much more attractive. Foreign small-cap stocks should be additive to the portfolio return in the long-run as small-cap companies tend to enjoy higher earnings and cash-flow growth relative to large-cap companies.

Since, much of our small-cap exposure is in European small-cap companies, European accommodative policy should prove to be beneficial in the long-run as well. While our fixed income exposure remains underweight due to the current risk/return profile, we continue to purchase individual fixed income securities as bonds play a vital role in the portfolio.

We believe alternative exposure remains vital to portfolio diversification. While we maintain a position in U.S. REITs, we have taken the opportunity to trim where necessary due to our belief that the asset class has potentially reached overvalued territory after outstanding growth throughout the recovery. Additionally, we continue to hold our strategic weight in commodities despite recent lackluster performance. We believe that the long-run inflation hedge as well as diversification benefits will be well rewarded in time.

These views represent the opinion of the Security Selection Committee which are based on qualitative as well as quantitative factors. These quantitative factors are primarily driven by valuation research which then forms our subjective assessment of the relative attractiveness of asset classes and subclasses over a 3- to 5-year time horizon.

Click on here to view the PDF version. 

Lease Negotiation in a Down Market

by David Luke, Heritage Mineral Mangement

There is always a challenge of balance when it comes to negotiating lease opportunities during a time of falling commodity prices. This is especially true when activity has been high and prices have been very strong – this is exactly where we stand today.

It goes without saying that an owner’s minerals and their power take a hit in an environment like today’s…the key is to analyze how long or short term we believe the decline will last, the recent and historical bonus and royalty rates in the area (from both offering and non-offering parties), as well as knowing the primary commodity product that will likely be produced from the given location of negotiation. At Heritage, we feel we provide expertise and real value to our client base at all times, but especially in times similar to today’s when some of the owner’s asset power is reduced.

The attached charts represent some of the world’s hottest topics – the volatility of the natural gas price and the drastic fall of the crude oil price…especially since the beginning of October. During this same time frame, a large amount of Heritage client owned acreage has been involved in valuable lease negotiation. The Heritage Mineral Management Team has used our experience, teamwork, research, vast contacts, and old fashioned common sense to lease (or not to lease) minerals at what we believe to be very fair to strong terms.