A Multi-Asset Income Approach That Redefines Balanced Investing

[A number of investment strategies were born specifically from a desire to solve personal, real-world problems or unmet investor needs. The Crawford Managed Income Strategy is a great example of an investment solution that was engineered for investors that were having a hard time generating income from traditional balanced stock/bond portfolios.

To better explore this investment solution, we were introduced to Aaron Foresman, CFA, Portfolio Manager for the Managed Income Strategy at Crawford Investments. We asked him questions to understand how this strategy attempts to strike a favorable balance between current income and risk mitigation across equity market risk, interest rate risk, energy risk, and credit risk.]

Hortz: Can you describe your investment philosophy and what motivated you to develop this multi-asset income strategy?

Foresman: I was actually prompted by my father around 2012, who asked me a question about how to generate more income in retirement. At that time, investors were having a hard time generating income from traditional stock and bond portfolios as yields declined materially. I began thinking through how he might supplement a traditional balanced account with other asset categories to generate a high level of income while providing diversification. The Managed Income strategy emerged as an attractive, objectives-based solution to a legitimate, real-world problem.

In 2014, the same year I joined Crawford, I began building the portfolio out in my personal IRA account. I recognized that I could produce an alternative that generated close to 5%+ income in a world where high-quality bonds were yielding just a fraction of that. While it would require taking on more risk, I knew by clearly identifying the four major risk categories – interest rate risk, energy price risk, stock market risk, and credit risk – that I could offset individual, security-specific risks against one another. In sum, through a process of disaggregation and analysis, the strategy seeks to mitigate risk through diversification and balancing, hence, offsetting as much single holding risk against other holdings as possible.

Today, the philosophy remains consistent. We continually search for what we believe to be the highest quality securities available in the higher income subsets of the capital markets, while managing the portfolio to strike a favorable balance between current income and risk mitigation.

Hortz: What role does a “quality” investment criteria play in your investment decisions?

Foresman: Quality plays a central role in all of our investment decisions at Crawford. We search for the highest-quality investments available in the higher yielding subsets of the capital markets that we cover.

More specifically, we believe that investors seeking income in a lower-yielding environment often reach for yield in lower-quality, higher-volatility securities, which we view as a poor risk-and-reward tradeoff. Instead, we focus on high-quality securities with sustainable income, strong fundamentals, and attractive valuations to help reduce volatility and improve long-term outcomes.

Hortz: What is your investment process across your equity, preferred equity, and corporate bond portions of your portfolio, and how does your investment team structure support that process?

Foresman: Our process is grounded in deep fundamental research and supported by distinct but highly collaborative equity and fixed-income teams.

Within dividend-paying equities, energy infrastructure, and real estate, our equity team conducts bottom-up analysis focused on companies with low earnings variability, strong balance sheets, differentiated business models, and proven management teams.

For preferred securities and corporate bonds, we leverage close coordination between our equity and fixed income teams. This allows us to selectively invest in securities where we already have a strong understanding of the underlying business, enhancing our ability to assess risk and identify relative value.

Importantly, our structure includes a dedicated equity research team alongside a separate fixed-income team, creating consistent cross-pollination of ideas. We believe this integrated approach is a meaningful advantage, particularly in higher-yielding areas of the market where credit and equity perspectives often intersect.

Hortz: How do you exploit inefficiencies across your key investment sectors in your portfolio?

Foresman: Higher-income segments of the capital markets are often less efficient, as they are dominated by income-focused investors who may underappreciate underlying risks. We seek to capitalize on these inefficiencies through disciplined security selection and deep fundamental research.

In dividend-paying equities, we leverage our longstanding expertise in equity income investing to identify high-quality companies that can deliver both income and total return, rather than simply screening for yield.

In energy infrastructure, we favor C-corporation companies over MLPs, focusing on investment-grade businesses with mission-critical assets, strong free cash flow, and durable balance sheets.

Within REITs, we benefit from public market liquidity while investing across a diversified mix of property types, balancing more offensive sectors such as data centers and industrials with more defensive areas like medical offices and triple-net lease real estate.

In preferred securities, we believe our active approach provides a significant advantage over passive vehicles. The market is fragmented and heavily concentrated in financial issuers, with many securities being small, illiquid, and often mispriced. Our ability to manage call risk, focus on qualified issues, and selectively invest in fixed-to-floating structures allows us to identify more attractive opportunities.

In corporate bonds, the size and complexity of the market create opportunities for selective investing. Our collaboration between equity and fixed income teams enables us to “cherry pick” bonds where we have high conviction in the underlying issuer, improving our ability to capture attractive risk-adjusted returns while managing interest rate sensitivity.

Hortz: Can you walk us through the components of your risk management process and how that drives your portfolio construction to ‘offset portfolio risk against itself’?

Foresman: The variety of income-producing asset classes utilized by the strategy allows its investors the opportunity to achieve greater diversification and, in turn, greater risk mitigation. We have identified four major risk categories, including interest rate risk, energy price risk, stock market risk, and credit risk.

What we have found is that, in this portfolio, we can actually offset individual, security-specific risks against one another. Through a process of disaggregation and analysis of the various risks associated with specific holdings in our portfolio, we mitigate risk through diversification and balancing. This is supported by a proprietary, internally developed risk management methodology that carefully considers each position’s contribution to the portfolio’s overall risk characteristics.

Essentially, we attempt to offset as much of the portfolio risk against itself as possible. For instance, we may control for interest rate sensitivity by offsetting utilities with regional banks; utilities are traditionally interest rate sensitive, while regional banks tend to be interest rate sensitive in the other way. What you end up with is two sets of securities that provide handsome yield and possess opposite behavior patterns with regard to the factor of interest rates.

Hortz: As a multi-asset income strategy, why do you not include private credit and loans in your portfolios and research team?

Foresman: At a high level, we are focused on public, liquid markets where we believe we have a research and execution advantage. Many higher-yielding areas require investors to accept additional risks alongside the yield, often in the form of illiquidity, complexity, or elevated risk. Our approach prioritizes quality, transparency, and risk control, and we believe we can achieve attractive income without moving into less liquid or more complex areas like private credit.

We use the NASDAQ U.S. Multi-Asset Diversified Income Index as our benchmark because it is designed to provide exposure to multiple asset segments that collectively generate a consistent and high level of income. We believe it is highly representative of our opportunity set and reinforces the strategy’s positioning as a true multi-asset income solution.

Hortz: How have current macro events, like the Gulf war and a shifting interest rate environment, affected your different income sectors and how are you managing those risks?

Foresman: We operate with the view that the future is always uncertain, and as such, the range of potential outcomes for any particular investment is wide. Rather than making macro bets, we focus on security selection, diversification across asset classes, and balancing the four key risk categories. This allows us to remain well-positioned across environments, including periods of volatility, shifting rates, and geopolitical uncertainty.

Hortz: Can you share your thoughts on how to apply this investment strategy to a client’s portfolio? What type of clients or investment scenarios did you design this strategy for?

Foresman: The strategy was designed for investors seeking current income with risk management, particularly those dissatisfied with traditional balanced portfolios. It can serve as a standalone income solution or complement a traditional stock and bond allocation, while providing meaningful diversification and limited overlap with traditional approaches. Ultimately, it is best suited for investors who need income, capital preservation, and reduced volatility, particularly in retirement or income-focused mandates.

This article was originally published here and is republished on Wealthtender with permission.

About the Author

Bill Hortz

Founder Institute for Innovation Development

Bill Hortz is an independent business consultant and Founder/Dean of the Institute for Innovation Development- a financial services business innovation platform and network. With over 30 years of experience in the financial services industry including expertise in sales/marketing/branding of asset management firms, as well as, creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms, including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His wide ranging experiences have led Bill to a strong belief, passion and advocation for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to address a business environment challenged by an accelerating rate of change.