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This brochure, most
recently updated on October 15, 2008, serves as a
replacement to Part II of Form ADV Uniform Application
for Investment Adviser Registration, which gives
information about an investment adviser and its business
for the use of clients and prospective clients. This
information has not been approved or verified by any
governmental authority. Registration as an investment
adviser with the Securities and Exchange Commission
(SEC) does not imply that the adviser possesses a
certain level of skill or training. Clients and
prospective clients may obtain a print version of this
brochure via
pdf
format download or by telephoning or writing P.R.
Herzig & Co.
P.R. Herzig & Co., Inc. (“the Firm”), managed since
1957 by its founding family, is a registered investment
adviser and a licensed broker-dealer (member FINRA/SIPC)
that provides investment supervisory services to
individuals, pension plans, charitable foundations,
trusts, and funds of funds. The Firm’s primary service
is managing separate long-only portfolios on behalf of
clients who grant the Firm discretionary investment
authority. It also provides investment advice and
analytical support to individual and institutional
clients who manage their own portfolios.
For most clients, the Firm’s entire compensation
derives from commissions on securities transactions and
a rebate up to 0.35% per annum on cash balances and
money market funds. (The Firm’s compensation does not
include various flat fees charged to clients by Pershing
LLC, a clearing firm with which the Firm has a financial
affiliation discussed below in Item 8.) For accounts
over which the Firm has discretionary investment
authority, commissions are calculated using a standard
schedule that takes into account the number of shares
transacted, the price of each share, and other factors.
For accounts over which the Firm does not have
discretionary investment authority, the Firm
occasionally negotiates other methods of calculating
commissions.
The Firm’s commission rates are significantly higher
than those charged by discount brokers. However, unlike
arrangements with many investment advisers, clients do
not pay the Firm a management fee calculated as a
percentage of the market value of an account. As a
result, the Firm believes total investment costs paid by
its clients are highly competitive, generally between 1%
and 1.5% of average invested assets per year for
accounts over which the Firm has discretionary
investment authority, and, in most cases, significantly
less for non-discretionary accounts. In any one year,
depending on client objectives and market conditions,
the total commissions on an account may be significantly
higher or lower than the estimated average range.
For one account, the Firm has negotiated a flat fee
payable yearly in advance to manage a portfolio of U.S.
treasury bills.
The firm seeks to provide a high degree of
transparency with regard to fees and expenses. Clients
receive a confirmation of each transaction clearly
disclosing the commission, and monthly statements
summarizing all activity and charges.
Clients may at any time add funds or securities to
their accounts, withdraw funds or securities from their
accounts, or close their accounts. There are no lock-up
provisions. Any fees paid in advance are refundable
pro-rata.
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Most of the Firm’s clients are
wealthy individuals and families. Many have maintained
accounts with the Firm for many years. The Firm also
manages portfolios and provides investment advice for
pension plans, charitable foundations, trusts, and funds
of funds.
Typical investments include common
stocks issued by domestic and foreign companies, units
of domestic and foreign royalty trusts, U.S. Government
securities, bonds issued by domestic companies, and
preferred stocks issued by domestic companies. Some
discretionary accounts also hold, or have held,
municipal securities, commercial paper, warrants,
options, bonds issued by foreign companies, domestic and
foreign mutual funds, and hedge funds.
The Firm employs a wide range of
methods to evaluate investments and manage portfolios,
including fundamental analysis, some aspects of
technical analysis and study of price trends, and
analysis of economic, market, industry, firm, and
product cycles and trends. The Firm’s investment
philosophy is eclectic and opportunistic, with an
emphasis on seeking a margin of safety in price.
Typical sources of information
include company SEC filings, press releases, company
websites, company earnings calls, financial news and
quotation services, financial data providers, financial
newspapers and magazines, corporate rating services,
analyst research reports, financial weblogs, internet
discussion boards, financial websites, and, where
practical, inspections of company activities.
The Firm continually adapts its
investment strategies to market conditions and
individual client needs. Decades of experience have
shown that no one approach works at all times for all
clients. Generally the Firm holds securities in taxable
client accounts for over one year, but, when
appropriate, will sell within a year to capture a large
gain or realize a tax loss. The Firm at times engages in
margin transactions for its own account, but does not
make short sales or engage in margin transactions for
clients except in special circumstances and at a
client’s specific request. It occasionally executes
option transactions at the request of clients, but does
not employ options or other derivatives in accounts over
which it has discretionary investment authority.
The Firm’s investment approach is
described in more detail elsewhere on this website.
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The Firm’s full-time investment
professionals must have a college degree or better. The
firm strongly encourages investment professionals to
pursue the Chartered Financial Analyst (CFA) designation
awarded by the CFA Institute. All current professionals
hold the CFA designation. The Firm also encourages
investment professionals to participate in the CFA
Institute’s continuing education program.
M. Thomas Herzig, CFA, born 1954,
is the Firm’s president and chief portfolio manager. He
joined the Firm in 1977 after obtaining a BA in
economics and romance languages from Bowdoin College. He
left the Firm in 1978 to earn an MBA from the University
of Cape Town, South Africa, then rejoined the Firm in
1979. In 1982, he was an early recipient of the
Chartered Financial Analyst designation. He is a member
of the New York Society of Security Analysts, and a
trustee of several trusts.
Sumner Gerard, CFA, born 1953, is
the Firm’s director of research. He also provides
analytical support to select institutional clients and
manages portfolios. He graduated from Bowdoin College in
1976 with a BA in economics and French literature. He
worked for 18 years at predecessor banks of JP Morgan
Chase, including 5 years in Taiwan and 2 years in China,
where he was the senior in-country officer. He was
employed by a New York-based fund of funds from
2000-2001, and joined the Firm in 2002. He earned the
Chartered Financial Analyst designation in 2000 and is a
member of the New York Society of Security Analysts. He
is an officer or trustee of several trusts and private
charitable foundations.
Arthur S. Pesner, CFA, born 1963,
is the Firm’s chief financial officer and compliance
officer. He graduated from Cornell University in 1985
with a BS in applied economics and management, then
earned his MBA from the University of Michigan in 1987.
He worked for the Securities and Exchange Commission
(SEC) from 1988-1994 as a securities compliance
examiner, and joined the Firm in 1994. He received the
Chartered Financial Analyst designation in 1994 and is a
member of the New York Society of Security Analysts.
Jonathon E. Ciaio, CFA, born 1976,
is the Firm’s principal trader and an assistant
portfolio manager. He graduated from Cornell University
in 1999 with a BS in applied economics and management.
He was a financial adviser at UBS PaineWebber from
2000-2001 and joined the Firm in 2001. He earned the
Chartered Financial Analyst designation in 2006, and is
a member of the New York Society of Security Analysts.
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As described in Item 1, the Firm is
a FINRA registered broker/dealer and occasionally
executes securities transactions for some clients who do
not solicit investment advice.
The Firm has arranged with Pershing
LLC to provide clearing and custodian services to the
Firm’s clients. Pershing, a wholly owned subsidiary of
The Bank of New York Mellon’s holding company and one of the
largest and oldest clearing firms in the United States,
holds the clients’ securities and cash, issues
statements and confirmations, and provides compliance
support and other back office services. Pershing is
compensated for these services by a flat charge on each
securities transaction, which it takes out of the
commission received by the Firm. Pershing is further
compensated by the spread it earns on clients’ cash
balances and by fund processing and revenue sharing fees
on money market funds, of which it rebates up to 0.35%
per annum to the Firm. This practice is common in the
investment industry, and the Firm believes its clients
receive competitive money market rates. Pershing is also
compensated by other miscellaneous fees charged directly
to the Firm’s clients, including fees to transfer
accounts, transfer funds, deposit securities
certificates, store precious metals, and other services.
In general, these fees are small relative to a client’s
total investment expenses, and are occasionally absorbed
by the Firm. Pershing’s compensation and other policies
are described in a disclosure statement sent each year
to all clients.
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As described in item 1, the Firm is
a FINRA registered broker/dealer whose primary
compensation derives from commissions generated by
executing securities transactions for clients.
The Firm does not buy securities
from, or sell securities to, any investment advisory
client. The Firm, and its officers, employees, and
family members generally hold the same securities the
Firm buys for client accounts over which it has
discretionary investment authority. However, to
accommodate diverse individual circumstances and
investment goals, the Firm and its associated persons
may at times buy for themselves and for certain clients
the same securities that are being sold for other
clients, and vice versa.
The Firm prohibits itself and its
associated persons from benefiting from the short-term
market effects of transactions for clients. The prices
for transactions in a given security on a given day
typically are averaged so that no one account or client
receives preference. When prices are not averaged, the
Firm gives preference to clients over itself. The
compliance officer reviews all transactions executed by
the Firm daily, and conducts an additional review of all
securities transactions by officers and employees
quarterly.
The Firm has adopted the
CFA Institute’s Asset Manager Code of Professional
Conduct and the Code of Ethics and the
Code of Ethics and Standards of Professional Practice.
It has also adopted detailed policies and procedures to
implement these codes. A client or prospective client
may request a copies of the codes by calling
800-275-2920, by writing to P.R. Herzig & Co, Inc., 1
Expressway Plaza – Suite 200, Roslyn Heights, NY 11577,
or by downloading or viewing them at the links
highlighted above.
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The Firm generally requires a
minimum of $500,000 to open an advisory account. It
believes that this is the minimum amount required to
successfully execute its investment strategies for an
individual portfolio. However, smaller accounts may be
accepted at the discretion of management.
The Firm’s portfolio managers and
compliance officer continuously monitor accounts to
identify and correct any transaction or valuation
errors, and to implement investment strategies that
serve each client’s investment objectives. At a
minimum, a review is conducted the day of and the day
after any securities transaction in an account and after
the end of each month. After the end of each month, the
compliance officer reviews account statements and all
investment professionals review investment performance,
which is tracked monthly for each advisory account with
a market value over $100,000. More frequent account
reviews are triggered by such factors as: a) awareness
of a material change in a client’s circumstances or
investment objectives, b) significant changes in market
conditions, c) changes in the portfolio manager’s
assessment of a security held in an account, and d)
divergence of an account’s investment performance from
management’s expectations.
The Firm holds approximately 150
accounts for which it provides investment supervisory
services. Four investment professionals have review
responsibility for these accounts.
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The Firm arranges for its clearing
firm, Pershing LLC, to furnish clients with
confirmations of trades or debit/credit advice promptly
after completion of any portfolio transaction for which
the Firm has placed an order. The confirmations detail
the principal amount, any commissions, and any SEC fees
for each transaction. In addition, the Firm arranges for
each client and/or client’ designated representative to
receive monthly account statements showing the activity
in each of the client’s accounts and the market value of
each security in the accounts.
The Firm, upon request, may provide
additional reports showing the industry and sector
diversification of a portfolio, the cost basis of
securities held, realized capital gains and losses, and
other portfolio information. In addition, through
meetings, telephone calls, and letters, the Firm
regularly keeps clients informed of the investment
policy and strategy for achieving clients’ investment
objectives. The nature and frequency of these reports
and other communications are determined primarily by the
particular needs of each client.
The Firm posts its privacy policy,
proxy policy, business disruption recovery plan, this
information pamphlet, and other disclosures on its
website at
http://www.prherzig.com and offers at least annually
to send them to clients.
As described in Item 1, the Firm is
a licensed broker-dealer whose primary business is
managing portfolios on behalf of clients who grant the
Firm discretionary investment authority. This authority
gives the firm the power to decide which securities to
buy and sell, in what quantities, and at what commission
rates. The Firm typically has the power to select
another broker/dealer when necessary to complete an
international or other transaction that it cannot
execute itself through its clearing firm, Pershing LLC.
In selecting such broker/dealers, the Firm considers
primarily the ability to execute a trade promptly at a
competitive price. Without specific client instructions,
the Firm typically does not have the power to transfer
funds or securities to or from a client’s account.
The Firm occasionally shares in
fees charged by investment companies, as disclosed in
their prospectuses, on certain classes of mutual funds,
typically legacy holdings in accounts transferred from
other institutions. The Firm currently does not have an
arrangement for receiving compensation for referring
clients to other advisers, but may, with full
disclosure, adopt such an arrangement in the future to
serve the interest of clients.
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Printable (pdf) Version of this Brochure
Form ADV Part I on SEC Website
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