The first days on a new job are usually uneventful. You meet your new colleagues, go by Human Resources to set up withholdings and start reading through the company’s policy manual. No excitement, no stress and certainly no surprises.
If only my first days at Covenant Trust Company were this uneventful. My tenure at Covenant Trust Company (CTC) began September 1, 2008, and those first days were hardly uneventful or lacking surprises. My first days at CTC started to go as expected, but not for long.
I had been invited into the Investment Committee’s meeting to watch them review client accounts. It was impressive watching the committee go through a large stack of account statements, asking questions about the investment allocations, asking if the clients’ information was current and other details that were pertinent. And although it was impressive watching this thorough process, nothing out of the ordinary seemed to be going on. Shortly after 9:00 AM, however, that all changed.
The door to the meeting room opened and we were informed, “The Market’s already down 250.” Somewhere around 10:00 AM, the door opened again and we learned, “The Market’s down 400.” Later, the news continued, “The Market’s fallen over 500.” I distinctly remember at that juncture thinking about my new job and postulating, “This is going to be a very short ride.”
When the committee adjourned for lunch, I expected to walk out to panic and pandemonium. I was certain there would be phones ringing, people shouting and office doors slamming. None of that, however, was happening.
The gentle din of the office activity hadn’t changed. To be sure, there were discussions going on about the day’s financial events but there clearly was a pervasive calm. This was more than a bit puzzling to me.
As that day’s events and the days following unfolded, I came to realize that CTC’s investment procedures were not based on market-timing or picking the “next hottest stock” or pursuing hot tips and rumors. Rather, clients’ investments were based on asset allocation utilizing various stock funds (mutual funds) tied to indexes like the Standard & Poor 500. These stock funds were balanced with investments in bond funds.
To be sure, there was concern with the precipitous drop in the stock markets but the model being used was designed for disciplined, long-term performance and it was designed to weather mercurial swings in the markets. It was not long after that I was able to see firsthand how the asset-allocation model worked in “real life.”
I met with an elderly client who was very concerned about how her CTC trust was doing. She had received a statement but didn’t understand the figures pertaining to her investments. I did some calculations and told her, “Well, it looks like you’re down about 3%.”
“That’s all?” she replied. “I know people that have lost 50%.
In reviewing her account further, it was evident that her asset allocation was very conservative reflecting an investment-mix appropriate for someone in their 80’s. When her investments were established, a modest return was sought while protecting the funds in her trust. The model worked. It had weathered the storm.
It was also evident that much thought and expertise went into the asset allocation CTC would recommend to its clients. Things like a client’s age, their risk tolerance or aversion, if they were retired or still working, what — if any — investment experience they had, and their long-term goals.
It has been five years since those first days at Covenant Trust Company. I have seen on countless occasions that the disciplined approach to investing utilized by CTC pays off. I have seen that, by taking “the long view,” we are able to help clients reach their goals whether those goals involve funds for retirement, an inheritance for children or bequests to help ministries that have blessed our clients throughout their life.