Investment Management
Our investment philosophy is to prudentially balance capital preservation and capital growth over the long term. We aim to generate solid returns over time by investing in what we feel are durable companies and assets with strong focus on risk management.
Our investment style is agnostic – that is, we are not value or growth investors, we evaluate each investment on its own merits. Investments are not attractive to us solely because they are cheap nor excluded from the opportunity set because they are deemed expensive. We seek to invest in companies and assets where we believe the long-term intrinsic value is misunderstood or underpriced.
We recognize that every client’s goals and risk profile is different. So, we will take the time to get to know you and structure a personalize portfolio designed to balance your overall risks, return and financial goals.
Finally, perhaps most importantly, we believe investing is something that should be measured in years not months or quarters. Our goal is to deliver strong risk-adjusted, after-fee and after-tax returns over a three- to five- year investment horizon. This overriding philosophy combined with our focus on risk management is how we strive to deliver the best outcomes for our clients.
Long-Term Focus
We invest with a minimum time horizon of 2-3 years. First, our focus is on identifying companies that offer durable growth and therefore need clients that are aligned with a similar time horizon. We also believe markets, which are now dominated by passive and index strategies, have increased volatility and, at times, create large price divergences relative to fundamentals. Investing with a longer time horizon may help reduce the risk of you becoming a forced seller and potentially position you to benefit from short-term volatility.
Secondly, we believe long term investing is significantly more tax efficient. Given the difference in long term capital gains and ordinary income tax rates, short term gains are taxed at significantly higher rates. Our goal is to identify businesses that are capable of compounding earnings growth for many years, which allows for the continued tax-deferred compounding of your investment.
Diversification
Over the long term, we believe diversification across geography, asset classes and sectors will, on average, yield higher returns and lower the risk of any individual holding or security. Our goal is to construct a portfolio of 20-30 securities that can be held over a long period of time that balances macro variables like interest rates, exposure to emerging markets and economic cyclicality.
* Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment loss. As with any investment strategy, there is the possibility of profitability as well as loss.
Disciplined Entry Points
We will seek to own businesses that are likely getting stronger relative to peers over time. However, we believe the highest risk to investors is overpaying for an investment, so we seek to invest when we think there is a reasonable margin of safety to long term value is present.
As we have witnessed throughout our careers, while it’s easy to say “buy low and sell high”, few investors have the temperament and experience to act on that simple motto. That is because when stocks become the cheapest (lowest risk) is usually when things seem to be at their direst and its feels safe not to act. Conversely, when stocks go up day after day and valuations become stretched (highest risk), it can become comforting and difficult to reduce or sell. We are opportunistic and stand ready to act, but we are equally likely to be disciplined and patient if the margin to long-term value is not present.