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Investment Management

Our Guiding Principles for Risk Management

1. Question Tradition

Traditional asset allocation appears to provide a diversified portfolio comprised of asset classes. However, this so-called “diversification” typically fails during a down market event, such as between January 1, 2008 and December 31, 2008 (pictured below). Correlation reveals that the portfolio isn’t so diversified after all.

2. Understand Diversification

A lineup of Investment strategies, some better suited for up markets and some for down markets, are incorporated at statistically optimal weights through a proprietary full-scale strategy diversification process. By creating this optimal mix, the diversified blend of methodologies creates a portfolio that is designed to dynamically adapt to changing markets.

Investments and strategies shown may not be suitable for all investors. The sampling of investment strategies shown are for illustrative purposes only and are based upon individual observation and potential use during the various market cycles.

3. Know the Effects of Emotion and Behavior

Investors often sell amidst market downturns and buy when sentiment is most euphoric. The timing of these reactive decisions, evidenced by the average returns following periods of excessive investor inflows and outflows to stocks, can have a material impact on realized returns.


Source: Morningstar, Blackrock (March 1993-March 2018)

Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantee against market loss or greater or more consistent returns.

Source: J.P. Morgan Asset Management. (Top) Barclays, Bloomberg, FactSet, Standard & Poors: (Bottom) Dalbar Inc. Indexes used are as follows: Bonds: Barclays Capital U.S. Aggregate Index, 60/40: A balanced portfolio with 60% invested in S&P 500 Index and 40% invested high quality U.S. fixed income, represented by the Barclays U.S. Aggregate Index. The portfolio is rebalanced annually. Average asset allocation investor return is based on an analysis by Dalbar Inc., which utilizes the net of aggregate mutual fund sales, redemptions and exchanges each month as a measure of investor behavior. Returns are annualized (and total return where applicable) and represent the 20-year period ending 12/31/18 to match Dalbar’s most recent analysis. Guide to the Markets – U.S. Data are as of March 31, 2019.

4. Put Risk First

When we talk about risk, it doesn’t just mean volatility; we are really talking about the potential for loss. We begin our investment management process by attempting to utilize any data that we can collect in order to model the probability and magnitude of loss and then implement a comprehensive risk diversification strategy. We then match your personal client riskalyze profile to the appropriate strategy.