Informed Perseverance

Informed Perseverance

To achieve consistent, risk-adjusted returns, portfolio management should be active.

While strategic asset allocation establishes the portfolio framework, staying the course with carefully selected managers offers the greatest opportunity for long-term gain.

In our view, return is a function of risk and earning back losses is more difficult than not losing the money in the first place. We attempt to achieve the desired balance of risk and return from the specific perspective of each client, recognizing that we cannot dispose of risk entirely. We seek to achieve this at both the asset allocation and underlying manager levels.

  • We use tactical tilts to move toward short term allocations that have more favorable risk return trade-offs. In addition to our macro economic outlook we also take into account interim changes in relative asset prices between rebalancing programs and their resulting effect on potential return. Tactical tilts from our strategic allocation weights enable us to buy the asset we want at a discount to its intrinsic value or trim it back at a premium if past relative underperformance or outperformance has been overdone. This continued exploitation of buying and selling opportunities is another example of informed perseverance.

  • With the courage to lean against the prevailing wind, we are prepared to go through periods of weakness in adhering to the “margin of safety” principle. Balancing the benefits of diversification with the importance of conviction, we limit the number of managers within an asset class and the number of asset classes and styles within a portfolio. This enables us to monitor managers more closely and have the conviction to allocate additional capital to them before their strategy ultimately returns to favor.