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Frequently Asked Questions

 

How do I know Bridgeport will be objective in selecting investments for my investment account?

First, Bridgeport is bound by securities regulation and its own policies and procedures to act in good faith and in the best interest of its clients. Second, unlike many other financial service firms, Bridgeport only receives compensation from its clients and does not receive any fees from third parties for recommending or selling financial products or any transaction commissions from buying and selling securities. This enables us to avoid conflicts of interest and manage client investments to maximize investment returns.

Does Bridgeport’s management invest in the same portfolios as the firm’s clients?

Yes, management has invested a substantial portion of its net worth in the same investments as those held by Bridgeport’s clients. In fact, when deciding whether to make a given investment for clients, management generally decides first whether it wishes to make a financial commitment to the investment.

Are Bridgeport’s fees deductible for personal income tax purposes?

Yes, unlike many fees imbedded in financial products such a mutual funds, Bridgeport’s investment counselling fees are generally deductible for personal income tax purposes if paid in respect of non-registered investment accounts. This can substantially reduce the after-tax cost of investment management for many clients. For more specific information about the tax deductibility of fees, we encourage our clients to consult with their tax advisors.

How does Bridgeport charge its clients for its investment counselling services?

Bridgeport charges its clients a base fee equal to a percentage of the value of the portfolio managed. This percentage is less than that charged by most mutual fund managers. In addition to the base fee, Bridgeport charges clients a fee which is based on annual returns achieved in excess of a predetermined benchmark. We believe this two tiered fee structure more closely aligns Bridgeport’s interests with its clients as compared to many higher base fee structures which are often charged by investment managers regardless of actual investment performance.

Why does Bridgeport manage client investment portfolios in separate client accounts as opposed to on a pooled basis (like mutual funds)?

Bridgeport manages client portfolios through individual client accounts held at TD Waterhouse as it believes each client faces a different financial situation and thus requires an individualized approach to the management of their wealth.

For example, a client who desires a more conservative approach to investing will likely desire a different portfolio asset allocation than a more aggressive investor. In addition, the stocks or bonds selected by Bridgeport for these client accounts may differ as result of a client’s varying risk tolerance. Because it is difficult to achieve individually tailored investment solutions for clients if their money is pooled together with money from other individuals who may have completely different financial objectives, Bridgeport chooses to manage its client’s investments in separate accounts.

Can having a separate investment account managed by Bridgeport help me avoid buying investments when they are overvalued and selling them when they are undervalued?

The short answer is that most investment managers and investors including Bridgeport seek to buy investments when they are undervalued (or inexpensive) and sell them when they are overvalued (or expensive). This is simple enough, but the problem for many mutual and pooled fund investment managers is that investors in their funds tend to want to withdraw money from their funds when portfolio returns are weak or have recently declined (and investments may be undervalued) and invest when portfolio returns are strong or have recently increased (which often is when investments are overvalued). Despite our desire to buy low and sell high, the twin evils of fear and greed often cause investors to do exactly the opposite.

The problem is exacerbated, however, for mutual and pooled fund investors as even if they are able to control their emotions and buy when returns have been poor and sell when returns have been strong, their future investment returns are often linked to the irrational behaviour of the other investors in the fund. For example, if most fund investors choose to let fear overwhelm their investment decisions and redeem their fund units when investments may be undervalued, the investment fund manager will often be forced to sell a portion of the fund’s investments to provide cash to those selling investors. This may ultimately hurt future fund investment returns including the returns earned by the disciplined fund investor who did not choose to redeem units when investments might have been generally undervalued. The reverse is, of course, true when portfolio returns have been strong as, in this case, investors often contribute additional money to the fund which often compels the fund manager to make new investments (at potentially overvalued prices) on behalf of all of fund unit holders (including the more rationale investors).

With separate accounts, we are able to advise our clients independently and investment decisions made with respect to one client account do not usually impact the performance of other client porfolios. Managing investments on a separate account basis allows us to work with clients individually and make decisions that are appropriate to their specific circumstances.

 



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