Local asset managers cope with market volatility, swings By Elliott Burr Jonathan Riley and Stuart Friedman founded
Los Altos-based Riley Friedman Asset Management in May. With approximately $100 million under management that they invest in stocks and bonds, recent market swings can make for rough rides.
Following is a Q&A between the Town Crier and Riley.
Q: How long have you operated Riley Friedman Asset Management in Los Altos? What were you doing before?
A: We have operated Riley Friedman Asset Management in Los Altos since May. We have about $100 million under management currently. Prior to founding our firm, Stuart Friedman and I worked at a local registered investment adviser, myself for nearly 14 years and Stuart for nine years.
Q: What’s your overall strategy in managing money?
A: We manage individual securities (stocks and bonds), not mutual funds or ETFs (exchange-traded funds). Each account is created for the specific needs of the client. Additionally, we look at a client’s overall financial picture. We will consult with (the client) to make sure those accounts are invested in a manner that integrates with the accounts we manage.
Q: The roller-coaster stock market isn’t necessarily the best place right now for weak-stomached investors. How do you cope with volatility?
A: We cope with the volatility in multiple ways. First, the stocks we buy are quality companies. They are typically seasoned companies with high profit margins, low debt relative to their industry and strong cash flows. Additionally, we have a large bond component to many of our client accounts. Almost half of the money we manage is in bonds (municipal, corporate and agency bonds). This reduces volatility tremendously, in a roller-coaster stock market that will continue to be treacherous.
Q: What value does your firm offer at a time when some people would prefer to manage their own portfolios?
A: For a client’s overall portfolio, the most important thing we bring to the table is a disciplined, cohesive strategy that helps clients get to retirement and stays there. The accounts we manage are well diversified. On the bond side, a retail investor (someone managing money on their own) can’t get the same pricing we as an institution can. Bonds are a blind item, meaning a broker will tell you they are not charging you a commission, however, they are marking up the price. This markup can oftentimes be in excess of 5 percent, depending on the bond. We buy bonds from several different firms, and they know if the markup on a bond is too high, we can find it somewhere else for less. For the stock portion of a client portfolio, we bring objectivity to the table. When the market declines and stocks go “on sale,” many people run the other direction. We have cash available in client accounts and seek to take advantage of these opportunities.
Q: Favorite midnight snack?
A: Baskin Robbins Peanut Butter and Chocolate Ice Cream. I could probably eat it by the gallon.