Wealth Strategies

Investment Philosophy

Core Philosophy

  • Markets work
  • Risk and return are related
  • Enhanced passive strategies for public markets
  • Skill is better accessed in private and fixed income markets
  • Asset allocation—diversification and return
  • Access to top managers is critical in inefficient markets—private and fixed income
  • Minimize expenses and taxes to further success

Fixed Income Philosophy

  • Risk and higher potential returns to be sought in equities—bonds control risk
  • Broad portfolio diversification
  • Shorter maturities to avoid uncompensated volatility risk
  • Inflation protected bonds better offset inflation linked liabilities
  • Higher quality securities control credit risk
  • Municipal bonds for clients in higher tax brackets

Equity Philosophy

Our philosophy generally mirrors that of the Efficient Market Hypothesis developed by Eugene F. Fama of the University of Chicago. His conclusions:

  • Current pricing generally incorporate all available information and expectations
  • Current prices are best approximation of intrinsic value
  • Price changes are due to unforeseen events
  • “Mispricings” do occur but not in predictable patterns that can lead to consistent out performance

Implications:

  • Active management strategies cannot consistently add value through security selection and market timing
  • Reducing costs (less trading costs, less market impact from trading, less analyst costs, etc…) is key to achieving capital market returns
  • Risk and return are related - Investing in companies such as small companies and companies with lower market value to book value is expected to provide higher returns