Innovate and look forward
A critical component to investment success is the relentless pursuit of being prepared for what comes next. Grand distortions caused by recent years of unorthodox monetary policy may mean that the era of simply gathering data and using it to calibrate future allocations is over. We believe investors are better served by directing their efforts to what they can control: building a robust portfolio that can weather the inevitable volatility and unknown elements of financial markets.
Invest like an owner
The era of big data, low trading costs and massive product proliferation has created an environment where, far too often, client investment portfolios have more in common with casino-like statistical strategies than they do with a well-constructed foundation for wealth. A banker’s methodology towards credit, a prudent stance to fiscal policy and a visionary approach to products and services — these elements comprise the foundation of why, how, and with whom, we deploy capital.
Embrace human behaviour
We believe that traditional finance assumes that all investors are rational and well-informed, and that the economic environment in which they operate has a very mechanical business cycle that follows understood patterns. In practice, human beings learn and adapt as they go along, and so the financial environment in which they function changes accordingly. We believe it is wiser to think of the investment world as a complex adaptive system, and to pursue returns and manage risk based on this view.
Mitigate outside and inside risks
On the outside, fixed-income and equity investments appear very different. But inside, at their core, similar to human DNA, their similarities are greater than their traditional categorizations imply. We call these similarities “risk factors,” and while there are many, we deem the following six as the most important to the management of risk and returns: Equity Risk, Volatility Risk, Real Asset Risk, Income Risk, Liquidity Risk and Foreign Exchange Risk. We believe an approach that takes risk factors into account provides better diversification than the traditional 60/40 portfolio, enabling us to achieve balance across a greater spectrum of asset classes, as well as the underlying sources of risk and returns.
