A better way to invest your money
Our investment philosophy is simple and may be quite different from the investment approaches you have experienced in the past.
We believe that investment decisions should be guided by the wealth of academic and empirical evidence available to us. It provides a number of clear pointers to where we should focus our energies to deliver our clients with a successful investment experience.
A philosophy based on sound evidence and theory.
Our approach is driven by what the empirical evidence and investment theory tells us we should be doing. We hold a number of enduring convictions that form the basis of our investment philosophy, which, in turn, guide the decisions we make on behalf of our clients
We define a successful experience as one where our clients can sleep soundly at night, have a strong chance of achieving their future lifestyle goals, and both understand and believe in the investment journey they are taking.
Our beliefs
We base our philosophy on a number of core beliefs and principles:
Belief 1
Capitalism and markets work effectively
We believe that despite its many failings, capitalism effectively creates wealth. We also believe that markets work well. The empirical evidence reveals that professional fund managers who can outsmart the markets on a consistent basis are exceptionally rare and hard to identify in advance. We therefore believe that trying to do so is a fool’s errand.
Our key goal is capturing the return of the market for our clients.
Belief 2
Risk and reward go hand in hand
Risk and return is a hard link to break. If you need a higher rate of return to achieve your financial goals, you will, inescapably, need to take on a higher level of risk and any promise of high returns and low risk should be a red flag.
Our rigorous wealth planning process helps to ensure that you only ever take on a level of risk that is right for you. Sensible risk selection, which is what good investing is all about, combined with disciplined portfolio management and governance, sit at the heart of our process.
Belief 3
Diversification is a useful tool
Diversification can be neatly summed up as “not putting all your eggs in one basket”. It is an intuitive and valuable concept when different types of investment have different return paths.
We use diversification broadly in client portfolios, spreading risks across individual securities (equities and bonds), geographically and by investment type. It is the key tool that we have against the uncertainty of the future.
Our principles
Principle 1
Focus on the structuring of a client’s portfolio
Your portfolio must be suitable for you.
We will structure your portfolio to align with your willingness and capacity to take on risk and the likelihood they will help you reach your goals. Our use of financial planning analysis and robust risk profiling tools help us to do this.
Successful investing is about taking on ‘good’ risks that deliver a positive contribution to your portfolio and avoiding your exposure to “bad” risks – things that are too risky in your circumstances. Our role is to help you understand which is which and combine them in a way that delivers you the strongest chance of achieving your goals.
Principle 2
Manage costs effectively
Costs come in two forms – financial and emotional. Minimising product and transaction costs is a key focus of our approach. We use low-cost, passive (index tracker) funds that deliver the bulk of the market returns we seek without the higher fees that typically come with actively managed funds.
From an emotional perspective, research into financial behaviour tells us that investors suffer from a number of psychological biases, driving them to make poor decisions. Our disciplined approach to the ongoing management of client portfolios, along with expectation management and education, helps to reduce the emotional costs of weak and poorly timed emotional decisions.
Principle 3
Manage risk
Investing is about managing risk tightly – eliminating risks we do not wish to take, and managing those that remain with diligence, insight and discipline. If the right risks are taken, the right returns should follow.
Risk management can be divided into three key areas:
Rebalancing: Having set the right long-term portfolio structure, it is important that the portfolio does not begin to stray too far from this mix, which it will do if left unattended over time. Our solution is to rebalance the portfolio back to its original mix of risks on a regular basis.
Product due diligence: We undertake detailed and methodical due diligence before we recommend any product.
Ongoing governance: We have a formal Investment Committee that meets regularly to review a broad range of risks and other investment issues that impact on client portfolios and to reaffirm or refine our robust investment process where needed.
We spend considerable time understanding what makes sense for our clients and building them well-structured portfolios that we have every confidence in and they do too.
