Morningstar Advisor - June/July 2010 - 21

Advisor Profile

Preparing for Turbulence
By Josh Charlson

Carl Dockery makes sure he and his clients are thinking about risk in every phase of the investment process.

Carl Dockery brings a distinctive perspective on risk to the asset-allocation and portfolio-construction work he carries out for clients. Before becoming a financial planner, Dockery spent a dozen years as second in command at a family-owned reinsurance business. Reinsurance involves taking on a portion of the risk embedded in the policies issued by other insurance companies. “The kind of insurance we provided was long-tail insurance,” Dockery says, referring to insurance in which claims may come in long after the policy was written. In turn, that meant that the premiums collected in a given year had to be managed carefully. “The pot of money you took in this year may need to last eight or 10 years or longer,” he says. Dockery, whose practice is based in Lakeland, Fla., believes that a similar dynamic is at work in the investment business. “You need to be prepared not to have your best outcome come about,” he says. That means designing portfolios to weather different market conditions and, moreover, having the perspective to see that times may not be as bad as they look when a “long tail” kind of market hits.
The Advantages of Active Management

career as a financial planner. As part of his role at the firm, Dockery worked closely with the institutional equity and fixed-income managers responsible for overseeing the company’s reserves. He was impressed with the prudence and long-term approach by which they ran the insurance assets. When the market for reinsurance softened in the late 1990s, Dockery’s family began to wind down the business. Dockery used the transition as an opportunity to take stock, and he began to pursue a career in investments. He worked part time for a local broker-dealer in 2001. But he was frustrated in that corner of the industry. He wanted greater fiduciary responsibilities and privileges he’d seen his institutional money managers employ. Seeded by a small book of business from his broker-dealer work, and investments from friends and family, Dockery established Alpha Advisors in 2006. One of the key tenets of Dockery’s investment philosophy, as suggested by his firm’s name, is a belief in the value of active investment managers. When he began seeking out managers for clients in 2001, he was impressed by what he found. “I was amazed to find so many managers who have done a very good job on a 10-year basis of outperforming their benchmarks and peers,” he says. Such consistency over long periods gives him comfort that his clients’ assets will be well cared for in those managers’ hands.

Thus, the portfolios Dockery designs for his clients aren’t likely to look much like the indexes. He’s a big fan of Bruce Berkowitz, for example, the iconoclastic skipper of Fairholme Fund FAIRX, and he has long allocated assets to First Eagle Global SGENX, run for most of the past decade by now-retired value investor Jean-Marie Eveillard. Fund managers like these aren’t shy about loading up on cash when they think the market is expensive or building concentrated positions in a stock or asset class in which they have high conviction.
Prepared for Storms

In building portfolios, Dockery also draws on the risk lessons from another experience in his life: flying airplanes. In the mid-1980s, Dockery completed most of the training necessary to get licensed as a pilot of single-engine aircraft. Dockery chose not to pursue the hobby, but the risks of flying remain at the top of his mind. Noting several neighbors and friends who died piloting their own planes, Dockery says that typically it’s not one thing that brings down a plane, but a number of smaller problems occurring together. Dockery applies this idea to his practice by aiming to construct a portfolio diversified enough to withstand many different market environments. A good manager can simply end up in the wrong asset class in the wrong year, Dockery says, so it’s critical to not only find

Dockery’s work in the reinsurance business was also instrumental in launching his

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Morningstar Advisor - June/July 2010

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