Profile

Symmetry Capital Management is a Pennsylvania limited liability corporation that provides investment management services to individual and small institutional investors. Our primary goal is to provide clients with institutional sophistication at a reasonable price TM.

People

The firm’s current principals are Arthur Patten and Travis Fraser.

Mr. Patten oversees investment strategy, portfolio management, and firm operations and regulatory compliance. He earned a BA in History from Emory University, and an MBA from Villanova University. He is a member of the Phi Kappa Phi and Beta Gamma Sigma Honor Societies. From 2002 to 2006, he was an Investment Advisor with PNC Advisors, the private banking arm of The PNC Financial Services Group. From 2000 to 2002, he was a licensed Financial Consultant with J.J.B. Hilliard, W.L. Lyons, a full service broker-dealer and subsidiary of The PNC Financial Services Group.

Mr. Fraser oversees IT systems design and administration. He earned a BS from Messiah College, and an MS from Drexel University. He is currently a software developer for a division of the United States Treasury. Prior to this, he was a Systems Administrator for Drexel University’s College of Medicine, and a Network Administrator for ESDC.

Philosophy

We believe that well-functioning markets will actively seek equilibrium; in other words, markets are reasonably efficient. Under nearly all conditions, markets composed of a reasonably large number of diverse agents will provide the most accurate assessment of a security’s present value, based upon current economic and industry conditions, firm specific business strategies and execution capacities, and current and expected financial market conditions. We can also extend this proposition – that market prices are the best barometer of expected future performance – to other factors that are relevant but external to the underlying issuer of a security, such as government actions in the areas of fiscal, monetary, regulatory, and trade policies, and other risks and uncertainties that could meaningfully impact financial market conditions and/or a firm’s operating performance. These beliefs provide the underpinning for a long-term, basic investment strategy that allocates funds across broad asset classes in a way that is appropriate to an individual investor’s circumstances. These strategies are often referred to as passive or index investing.

Although we believe in the relative efficiency of markets, we also believe that, because human existence unfolds across physical time, efficiency is a process, not a state. Thus, markets spend most of their time in an equilibrium seeking process, but a true state of equilibrium is rarely, if ever, attained. The divergence between current market states and theoretical equilibria can vary quite a bit. Periods of wide divergence can reflect high levels of uncertainty, or unusually high or depressed levels of risk tolerance, and both states can provide attractive investment opportunities. These beliefs provide the underpinning for both tactical and opportunistic styles of investing, also known as active investing. The suitability of an active investment strategy is determined entirely by an investor’s circumstances. The possibilities for an active investment strategy’s success are determined in large part by the skill of the investment manager.

We believe that, among active investment strategies, contrarian approaches provide the best opportunity for long term investment success. By acquiring assets for which present demand seems low relative to future demand, and by selling assets for which present demand seems likely to exceed future demand, an investor can take advantage of especially high or low risk premia. This is the classic “margin of safety” approach espoused by Graham & Dodd and some of their well-known successors. However, contrarianism subjects its practitioners to at least one notable risk: swimming against the tide can have a negative impact on an investor’s balance sheet, as long as prevailing market opinion imposes a significant drag on the prices of unwanted assets. The essential nature that this risk posed to speculators was captured well in a quote attributed to John Maynard Keynes: “The market can stay irrational longer than you can stay solvent.” The strength of prevailing market trends has been borne out by the research of Benoit Mandelbrot and others, who have discovered that price trends can persist for a longer time than random walk models would predict. Thus, even though a contrarian investor might acquire an asset at a price estimated to be only a small fraction of its underlying value, success will not be realized until enough other market participants have come around to share this view, and thus narrowed the gap between price and value. In the meantime, the asset’s price may just tick downward or flat line indefinitely, unnoticed by the rest of the market, and this can be very discouraging. How can this risk be managed? Through diversification, hedging, timing, and information set.

Diversification is a well-known tenet of investing and can be implemented in many ways. The stock, bond, and money-market portfolio mix is perhaps the most fundamental example. Within an asset class, geographical or sector and industry diversification can be used to dampen portfolio volatility. While statistical regression of historical data plays an important role here, we believe that such analyses must be applied with extreme care, as the relationships they analyze may vary significantly over time and in different contexts of political economy. We manage this risk by paying close attention to how historic relationships have unfolded over time and under different conditions.

Hedging is another useful tool, and possibilities for hedging have expanded dramatically with continued innovations in financial markets. However, consideration of any hedge requires two fundamental acknowledgements. First, hedges are not free; effective management of risk requires a sacrifice of some degree of performance. Second, many investments simply do not lend themselves to effective hedging.

Timing, despite the prevailing wisdom touted in some of the investment industry’s marketing literature, is critical to long term investment success. The relationship between a security’s price and its perceived value may fluctuate widely over any period of time. The return that will be realized is determined primarily by the future price obtained relative to the initial price paid. Thus, timing is clearly a critical determinant of performance. We do not try to divine the market’s future direction from moment to moment. Rather, by adhering to our valuation and trading disciplines, we ensure that the timing of sales and purchases is supportive of expected performance. For example, to qualify for purchase, a portfolio security should be trading at a percentage of its expected twelve month price that minimizes opportunity cost relative to a prevailing money market rate. Unfortunately, the management of model portfolios does not always pay sufficient attention to this simple yet critical economic dictum. This oversight accrues to the benefit of trading desks and to the detriment of clients.

We also believe that the information set – and the insights which are applied to it – are crucial to an investment firm’s long term performance. Our preferred information set and insights are discussed in the description of our investment process, below.

Process

Our investment process is driven by both “bottom-up” and “top-down” analysis.

In our bottom-up activities, we seek to identify assets that are trading at a significant discount to their intrinsic value. This is primarily carried out through a two step process, with quantitative screening followed up by financial analysis and valuation.

Our top-down analysis is driven by ongoing assessments of multiple factors that are believed to impact business cycles and economic performance. For a number of reasons, we believe that government policies are the key drivers of short and intermediate term performance. Most significant are fiscal and monetary policies, followed by regulatory and trade policies. We are also attentive to other actions that are not as readily categorized but can still have a significant impact – for example, both educational investments and wartime expenditures will have notable effects on production possibilities and standards of living.

When assessing fiscal policy, we believe that the tax policies to which economic performance is most highly leveraged are those that directly affect the level of private investment. We also believe that trends in tax policy can be as significant as nominal tax rates, or moreso. On the expenditures side, we differentiate between consumption and investment; for example, a decision to use public revenues to invest in projects that are likely to enhance the long-term productivity of citizens will have very different long run effects than an investment in the preservation and extension of political power. On that latter point, we are very attentive to agency risks and standards of governance, in both the public and private sectors.

When assessing monetary policy, we subscribe to an expanded version of Milton Friedman’s dictum: inflation and deflation are always and everywhere a monetary phenomenon. Furthermore, we embrace the causal interest rate mechanism first described by Knut Wicksell in the early 20th century, and some of the subsequent extensions of his theory. As a result, we do not attach much significance to the nominal level of interest rates, instead paying close attention to a well-defined set of market indicators that imply the real stance of monetary policy, and by extension, the likely direction of the economy, the business cycle, prices, and interest rates. We are also attentive to insights developed by Nobel economist Robert Mundell, such as his dictum that in an increasingly integrated world economy, issues of money supply and inflation must be considered in a global context.

Regulation and trade policy (short of a global trade war) are typically incorporated into our assessments of individual sectors and industries. When assessing a foreign country’s investment climate, we are attentive to the level of uncertainty associated with arbitrary or capricious regulation.

We use the foregoing analyses to identify attractive sectors and industries at a given point in the business cycle. Because we are contrarians, we favor industries whose expected positive position has not been fully discounted by the market. Within those industries, we seek companies selling at steep discounts to revenues. One risk here is that the value of a dollar’s worth of sales is dependent upon capital intensiveness and other factors, and thus varies considerably across industries. Therefore, we are careful to make most fundamental and quantitative comparisons within industries, rather than across them. Especially attractive opportunities are those where we can buy a given revenue stream at a steep discount, and expect the business cycle to favor greater than expected revenue growth, and/or management initiatives to significantly increase profitability.

While we subscribe to the notion of an efficient market process, it is clear to us that markets are subject to various structural inefficiencies. We attempt to take advantage of these whenever possible. We also look at certain technical and administrative information that can add value to the investment process, such as trends in trading volume and shifts in ownership.

Portfolios

Symmetry Capital Management (“SCM”) offers the following services and investment strategies:

Personal Financial Analysis

Comprehensive Portfolio

Special Opps Strategy

Personal Financial Analysis involves a comprehensive analysis of assets, liabilities, and net worth, along with a personality assessment, that allows us to design a general financial strategy for you. The fee for this service is a flat $250, which is waived if you hire us to manage at least $50,000 of your assets. In complex cases, we may negotiate an hourly fee with you beforehand. Our Personal Financial Analysis produces a discounted balance sheet with an estimate of your net worth that is based on current and future assets, earnings, liabilities, and contingencies. From this, we can help you identify financial risks that should be addressed, as well as an appropriate investment strategy that is tailored to your situation and personal makeup.

The Comprehensive Portfolio is a carefully designed, long term allocation, invested primarily in fixed income securities and exchange traded funds (“ETFs”) that replicate various equity, fixed income, commodity, and financial market indices, in proportions that SCM believes will provide efficient diversification. The underlying allocations are tailored to each Client’s objectives and tolerance for risk, and may include allocations to cash or cash equivalents. The fee for our Comprehensive Portfolio is fifty (50) basis points of assets under management annually, charged quarterly. See the fee calculation section below. SCM strongly recommends that a client engage us for Personal Financial Analysis, as this will allow us to determine the asset allocation that is most appropriate for their situation. We will consider implementing a Comprehensive Portfolio based on the recommendations of a third party working on a client’s behalf, or designing one for clients who do not want or need comprehensive financial planning, but we are not under any obligation to do so.

The Special Opps strategy is primarily focused on capital appreciation through the identification and exploitation of opportunities across a broad universe of equity, debt, and derivative securities, including OTC and foreign securities, and publicly traded partnerships that, in the view of the manager, are compellingly valued. The portfolio will be held in a separately managed account (or “SMA”), and may invest a portion of assets in cash or cash equivalent investments. The manager may employ tactics designed to lower risk (volatility), but the Special Opps strategy is inherently risky and poses a significant risk of capital loss. Investors must determine the appropriate amount of their assets to invest in this strategy, based on their personal objectives and circumstances.

The Special Opps strategy is available to investors as a single mandate, but Symmetry Capital reserves the right to refuse or terminate any Agreement where it feels that the strategy is inappropriate for a particular client. The fee for our Special Opps strategy is one hundred fifty (150) basis points of assets under management annually, charged quarterly. For billing purposes, the Special Opps strategy is considered to be held outside of the Comprehensive Portfolio, in order to avoid duplication or overlap of advisory fees.

SCM does not impose a strict account minimum for either strategy. However, SCM may refuse to enter into or may choose to terminate an Agreement where it believes that the account size is too low to justify the anticipated management fee. SCM may negotiate or waive the minimum account fee in some cases. 

Performance

Because the Comprehensive Portfolio is tailored to each client, we do not maintain a performance composite for it.

Performance information for the Special Opps Strategy is available upon request.