Southwest investment advisors is an independent investment advisory firm founded in 2000 in Dallas, Texas. As an SEC-registered investment advisor, the company provides customized portfolio management services for high net worth individuals and institutions. With over 20 years of experience, Southwest investment advisors manages close to $1 billion in client assets. This article will provide a comprehensive review of Southwest investment advisors, analyzing its investment philosophy, fee structure, portfolio management strategies, clientele and performance track record. The pros and cons of investing with Southwest investment advisors will be weighed objectively.
Southwest investment advisors follows a long-term, fundamentals-focused investment approach
Southwest investment advisors adheres to a long-term, fundamentals-driven investment philosophy focused on preserving capital and generating consistent returns. Unlike short-term traders, Southwest aims to build concentrated, low-turnover portfolios that can compound wealth over market cycles. The advisors conduct in-depth fundamental analysis on each investment, assessing competitive advantages, management quality and valuation. Macro trends are also considered but don’t drive the investment process. This patient approach enables Southwest to exploit mispricings and take advantage of short-term market volatility.
The fee structure is transparent but higher than passive alternatives
As an active investment manager, Southwest commands higher fees than passive index funds. The standard management fee is 1% of assets under management for equity portfolios. Balanced portfolios with bonds cost 0.75% while fixed income accounts are 0.5%. There is no performance fee. Minimum account sizes range from $500,000 for individuals to $5 million for institutions. While transparent, Southwest’s fees are steeper than low-cost ETFs or index funds which can be had for 0.03% to 0.20% per year. Investors must determine if active management is worth the higher expenses.
Equity portfolios are concentrated while fixed income Exposure is diversified
Southwest equity portfolios are concentrated, typically holding 15 to 25 stocks. Positions can range from 3% to 10% at cost. This allows Southwest’s best ideas to drive performance. In contrast, its fixed income accounts hold 50 to 100 securities to mitigate credit and interest rate risks. State and local municipal bonds are favored for their tax advantages. Southwest also offers balanced accounts, blending equities and bonds to construct personalized portfolios. While concentrated, Southwest portfolios are aligned with the firm’s competencies and designed to maximize risk-adjusted returns.
Southwest caters to high net worth and institutional clients
Southwest investment advisors primarily serves wealthy individuals and institutions such as pensions, endowments and family offices. The minimum account size of $500,000 to $5 million locks out smaller retail investors. Geographically, most clients reside in Texas or broader Southwest US region. This focused approach allows Southwest to dedicate more attention to each client. Annual portfolio reviews and in-depth quarterly reports are provided. Clients also gain access to the firm’s investment research and commentaries.
Long-term performance record is strong but with periods of Underperformance
Since inception in 2000, Southwest’s Core Equity composite has returned 9.7% annualized, outperforming the S&P 500 by 1.5% per year. The Balanced and Fixed Income accounts have also exceeded benchmarks. However, Southwest has endured stretches of 2 to 3 years of underperformance versus indexes, owing to its high conviction approach. But over full market cycles, Southwest’s patient investing style has paid off. Investors should assess their own time horizon and risk tolerance when evaluating Southwest’s long-term results.
Overall, Southwest investment advisors is a reputable active money manager with a prudent investment philosophy centered on fundamentals and valuation. Its focused approach may outperform over long time periods but likely lag during bull market euphoria. Southwest is best suited for high net worth clients seeking customized portfolios and wanting to avoid index hugging. Just be prepared to pay higher fees for active management in hopes of earning superior long-run returns.