We work closely with you to develop your goals, and to assess your resources, time horizon, and tolerance for risk. Based on these factors, we recommend an investment strategy that is aligned with your personal situation. We then implement our strategy, monitor it vigilantly, and make adjustments as needed over time. We meet with you periodically to review your goals and financial situation, and we keep you informed of changes. When needed, we rebalance your investments so they remain aligned with our agreed objectives.
In managing your investments, we maintain a long-term perspective, and strive to help reduce shorter-term, emotionally-based decisions. Over time, we believe our clients are best served with diversified, liquid, cost-conscious strategies that are transparent and easy to understand.
Our investment process is transparent, and we are happy to discuss how we build and manage our strategies. More information fosters better alignment, and ultimately healthier investing behavior, in our view. Below, we outline two elements of our investment process - Asset Allocation and Investment Selection.
We start by assessing longer-term economic and market fundamentals to construct a diversified mix of asset classes for each strategy, with weightings that represent our forward-looking views of risk and return over a 3- to 5-year horizon. Asset classes generally include a mix of investments designed to provide exposure to securities issuers of varying size, industry, and geography, as well as security type (e.g. stock, bond). This is our Strategic Neutral Allocation for each strategy, designed with the goal of providing an attractive risk-reward profile and a prudent anchor for diversification over time. Because Strategic Neutral Allocations are longer-term in nature, they change less frequently.
As market and economic conditions change, we assess how valuations in each asset class are trending relative to our view of longer-term fundamentals. In the event that valuations deviate materially from our view of longer-term fundamentals, we may make adjustments to asset class weightings above or below Strategic Neutral weightings. Such adjustments are Tactical Allocations, made within risk-controlled bands around Strategic Neutral weightings, generally with a 1- to 2-year investment horizon.
Over time, relative results will cause asset class weightings to drift away from target allocations naturally, if left unattended. We monitor strategies closely and rebalance investments periodically to keep your weightings aligned with asset class targets.
Your financial situation and needs are likely to change over time. Effective, regular communication is key to making sure your investment strategy remains appropriate. In assessing your goals, time horizon, and tolerance for risk, our goal is to help you stay disciplined and focused on the long-term, while allowing enough flexibility to accommodate meaningful changes in your life.
Once asset class weightings are established, we select specific investments to execute our strategies. We use mostly liquid mutual funds and exchange-traded funds (ETFs) for which information is publicly available and that we believe are cost-effective. We use both actively-managed and passively-managed (e.g. index funds) funds in combination.
When selecting investments, we strive to construct strategies that are:
Our philosophy is to conduct thorough research upfront, with a focus on repeatable process rather than on short-term results. We believe excessive short-term trading can incur unnecessary costs and detract from client results over time.
Our process for selecting investments for each asset class level begins with a thorough quantitative screening process. We examine factors such as expenses, returns, volatility, size, tax efficiency, and investment composition, among others. We narrow down the universe to a set of investments for which we perform a second level of qualitative analysis.
Our qualitative criteria include factors such as manager skill and process, incentive alignment, governance, depth of research resources, asset stewardship, and style consistency over time.
The result is a select few investments that make the "short list" for each asset class as manager partners. We review investments within each asset class regularly against their peers, and we are continuously on the lookout for more effective investment choices.