Our Investment Philosophy
Our Investment Philosophy which guides our approach to managing our clients’ portfolios is grounded in research and experience:
Investing is a zero-sum game. In all financial markets, one investor’s outperformance can only come at the expense of another’s underperformance. Given the highly competitive nature of the markets, consistent and long-lasting outperformance is difficult and rare. We believe successful investment programs are predicated on approaching the markets with the humility they deserve, minimizing errors, emphasizing controlling what can be controlled.
All investors are prone to flawed decision making. All humans suffer from decision-making biases that often lead to sub-optimal decisions in the face of uncertainty. Recognizing our own fallibility as humans is central to our disciplined, evidence-based approach to investing.
Risk and return are inextricably linked. Investment returns are compensation for bearing risk. Risk is a necessary precondition for earning high investment returns.
Diversification is a powerful risk management tool. Spreading a portfolio’s investments between assets with uncorrelated returns has the potential to both decrease risk and increase returns. We seek to intelligently diversify our clients’ portfolios to ensure that the poor performance of a particular investment does not have an unduly negative impact on the total portfolio.
The future is unknowable. The world, including financial markets, is highly complex, dynamic, and adaptive making it impossible to consistently predict the future course of the economy or markets in a manner upon which profitable investment decisions can be made. We acknowledge our limitations in divining the future and invest our client’s assets accordingly by grounding our investment decisions on empirical evidence.
The past is a reasonable starting point upon which expectations for the future can be formed. A solid, well-informed understanding of the past in addition to a firm grasp of financial and investment theory are essential to developing rational expectations for the future.
Cycles will prevail. Investment performance is mean-reverting. No cycles or trends go on forever. Asset classes, styles, and strategies all come in and out of favor over time. We strive to be mindful of these cycles and to position our clients’ portfolios accordingly.
Valuations matter. No asset is a great investment at any price. Similarly, there are few assets that would be a bad investment at any price. What you pay for an asset has a significant impact on the future expected return on the investment. We actively strive to position our clients’ portfolios towards areas of the markets selling at attractive valuations.
Costs matter. In investing, you get what you don’t pay for. All else being equal, the lower the costs, the better. We place special emphasis on minimizing the fees paid by our clients on the investment options held in their portfolios.
A long-term perspective combined with discipline is a sustainable advantage. Investors are very rarely forced to act in the face of any market event. Discipline and patience enable an investor to avoid the deleterious impact of buying high and selling low and to capitalize on compelling opportunities when they present themselves.