Why Do Investors Invest?
We believe that protecting and growing the real (inflation –adjusted) purchasing power of our client’s wealth and future cash flow streams is a core objective.
With that premise as a starting point, we work hard to understand the individual goals and unique circumstances of our clients, and we incorporate that understanding into each decision we make. At the outset of each relationship, we discuss these objectives and our recommended approach.
Investment Philosophy
Security selection will be the primary source of returns relative to the corresponding index. We believe successful investment portfolios are assembled over time through opportunity. Volatility can be used to advantage. We build our client’s portfolios one security at a time by using our investment experience to help identify market and security opportunities where price and underlying value are misaligned.
Through detailed fundamental research, we seek to identify longer term secular trends that can have a significant impact on the value of an investment. Experience has taught us that investments benefiting from these trends can enjoy greater persistency and durability of rising capital flows than those that do not. Global trends and the resulting themes are used as a macro screening tool which offers an investment framework that enables us to focus and prioritize our resources on identifying unique stock picking ideas. We make impactful commitments to these investment opportunities, which may play out over a few years or run for a decade or more.
Preserving Wealth by Diversifying Risk
We further believe that asset allocation explains the bulk of a portfolio's forecasted and actual volatility and return. Armed with a clear understanding of each client's goals and constraints, we are in a better position to design an investment policy that creates an efficient combination of risk and expected return, within the context of those goals and constraints. We build portfolios of investments by "budgeting" risk. We believe that wealth is preserved by diversifying risk, and created by concentrating it. Such competing interests make it imperative for investors to think about risks in a systematic way. A risk budget helps us determine, and manage, how much of your capital is targeting diversification ("preserving wealth") and how much is targeting concentrated risk ("creating wealth"). Once our best security ideas are identified, we apply portfolio construction disciplines that help us produce the combination of those ideas that represent an efficient balance between expected excess return and risk. Each of our clients has different targets, but they all share the same approach.