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Capital markets work. Our commitment to this well-substantiated fact dictates all we do. In well-functioning markets, the buyer has the same information as the seller, prices quickly reflect new information, and new information comes randomly, thus:
- No identifiable trends or bias in price patterns appear;
- Returns come only from bearing risks that can’t be diversified away;
- Costs matter; and
- On average, managers will underperform any well-constructed benchmark.
Applying this philosophy to investment management means:
- Realizing market returns at minimum cost will result in superior performance;
- Active trading nearly always results in higher costs and underperformance in the long run;
- Most performance is explained by a strategic asset allocation; and
- Results must be periodically measured against established goals in a straightforward and understandable way.
Our approach is to construct client portfolios that meet specific risk objectives while providing long-term returns that exceed those of widely followed benchmark indices. We do this by consolidating several individually structured portfolios and/or ETFs that are designed to bear exposures to independent sources of risk that have been shown to explain worldwide returns while maintaining a relentless focus on costs.
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