Stratum Capital Management LLC, Client relationship summary
Form CRS.
The client relationship summary explains services, fees, obligations and conflicts. It includes questions to discuss with the firm before becoming a client.
Introduction
Stratum Capital Management LLC is registered with the State of Texas as an investment adviser. Brokerage and investment advisory services and fees differ, and it is important for you to understand the differences. Free and simple tools are available to research firms and financial professionals at investor.gov/CRS, which also provides educational materials about broker-dealers, investment advisers, and investing.
What investment services and advice can you provide me?
We offer investment advisory services to retail investors. Our principal service is discretionary portfolio management: we choose the investments and place the trades in your account, within the portfolio we manage. You do not approve each trade. Core trades follow written rules, and Alpha trades follow our judgment under a written methodology.
We offer one portfolio, held at target weights of 30% Core and 70% Alpha. The portfolio is the same for every client, and we do not provide financial planning. Core is a rules-based portfolio of large, dividend-paying US companies, rebuilt every quarter, and it can hold a single company or cash. Alpha, 70% of the portfolio, is a concentrated long-only equity portfolio with no cap on position size, reviewed quarterly and liquidated and rebuilt every January. Most of the portfolio therefore depends on our judgment, one company can move the account, and the January rebuild realizes taxable gains on most of it.
We monitor your account on an ongoing basis. Core is rebuilt by rule each quarter. Alpha holdings are reviewed each quarter against their written theses. We review your full account and ask you to confirm your profile once a year. We do not offer proprietary products, and we do not limit our advice to a menu of funds.
Before we open an account, a person at the firm reviews your answers on objectives, time horizon and capacity for loss, and decides whether the portfolio suits you. We do not open an account where it does not.
Questions to ask us:
Given my financial situation, should I choose an investment advisory service? Why or why not?
How will you choose investments to recommend to me?
What is your relevant experience, including your licenses, education, and other qualifications? What do these qualifications mean?
What fees will you pay?
You pay an asset-based management fee, a percentage of the assets we manage for you, billed quarterly in arrears and deducted from your custodial account:
Stratum Capital: 1.00% per year on all assets.
Our fee is the only fee we charge. You will also pay fees to third parties that are not ours: custodial fees, brokerage transaction charges, and any fund expenses. These appear on your custodial statements.
You will pay fees and costs whether you make or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Please make sure you understand what fees and costs you are paying.
We do not charge performance-based fees or commissions.
Questions to ask us:
Help me understand how these fees and costs might affect my investments.
If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?
What are your legal obligations to me when acting as my investment adviser? How else does your firm make money and what conflicts of interest do you have?
When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests. You should understand and ask us about these conflicts because they can affect the investment advice we provide you. Here is an example to help you understand what this means:
We are paid a percentage of the assets we manage. This gives us an incentive to encourage you to increase the assets in your account, for example, by recommending against withdrawals, because our fee grows when your account grows. We manage this conflict by offering the portfolio only where it fits your stated goals, and by disclosing the fee plainly before you invest.
Our personnel may also invest personally in the same securities we buy for clients. We manage this conflict through our written Code of Ethics, under which client trades take priority.
We have no other compensation-related conflicts to disclose: we receive no commissions, no payments from third parties, no referral fees, and no soft-dollar benefits. Our only revenue is the advisory fee our clients pay us.
Questions to ask us:
How might your conflicts of interest affect me, and how will you address them?
How do your financial professionals make money?
The firm is wholly owned by its principal, who receives the firm’s profits. The firm’s only revenue is the advisory fee described above. No one at the firm receives commissions, third-party payments, or compensation tied to recommending one investment over another.
Do you or your financial professionals have legal or disciplinary history?
No. Neither the firm nor its professionals have reportable legal or disciplinary history.
Visit investor.gov/CRS for a free and simple search tool to research us and our financial professionals.
Questions to ask us:
As a financial professional, do you have any disciplinary history? For what type of conduct?
Additional information
For more detail, read our Form ADV Part 2A firm brochure and your advisory agreement. To request an up-to-date copy of this relationship summary, or for any other question, write to us, we will send it promptly and without charge.
Questions to ask us:
Who is my primary contact person? Is he or she a representative of an investment adviser or a broker-dealer?
Who can I talk to if I have concerns about how this person is treating me?