WHICH INVESTMENT STRATEGY?
We offer five investment choices, spanning both alternative and traditional strategies. One or or a combination of these might be best for you, depending on your needs and preferences. Some wealth managers impose their choice of passive versus active on you; we believe there are pros and cons to both approaches. Depending on your needs and your investment history, you could choose to divide your assets across multiple portfolios. Importantly, the choice is yours. We are skilled in building them all, and in a tax efficient manner. If you require our opinion, we will evaluate your situation carefully and make a suitable recommendation.
Our core belief is an "smart beta" passive portfolio is suitable for all investors, and purist passive investors should choose a traditional passive portfolio. Some investors will prefer socially responsible portfolios. In addition, for very high net worth investors a small or moderate allocation to alternative active strategies is recommended.
Regardless of which portfolio or combination of portfolios you choose, we faithfully follow our disciplined min-max investment process and implement in a tax efficient manner.
CORE CHOICES
"SMART BETA" PORTFOLIOS
These portfolios are built using alternative beta indices that overcome design limitations of traditional indices. They outperform in the long run, despite slightly higher cost than a traditional passive approach ...
… an excellent choice for cautiously optimistic investors who want to combine the purity and low cost of the traditional passive rules-based approach with recent advances in alternative "factor premium" research conducted by organizations like DFA, Research Affiliates, EDHEC-Risk, Wisdom Tree, ProShares and others, yet in a minimal cost framework. Our "smart beta" portfolios are more accurately described as alternative beta. They employ next generation index based instruments, i.e. alternative indices, that generate long term excess returns through the use of "non market-cap weighted" indices. The traditional passive investment model relies on market-cap weighted indices which have structural design limitations and do not isolate certain alternative "factor risk premia" that can be easily harvested at minimal additional cost through the use of a new generation indices that leading institutional investors now use.
"ALT ACTIVE" PORTFOLIOS
Use alternative asset classes to enhance long run return by earning additional risk premiums which are not accessible to passive investors such as the short premium, illiquidity premium and complexity premium ...
… suitable for high net worth investors who want to invest in alternative assets like liquid alternatives, structured bonds, fund of hedge funds and private equity funds. Some of these strategies might have low liquidity or path dependent returns, and may not be suitable for all clients. While most clients will prefer to work with us on a discretionary basis across most of our portfolio strategies, we typically work on a non-discretionary basis when managing alternative portfolios.
"SOCIALLY RESPONSIBLE" PORTFOLIOS
Invest in a manner consistent with your personal value system by excluding undesirable businesses ...
… although we are not "preachy" about this, a socially responsible investor avoids investing in traditional passive strategies -- since such investing typically allocates capital to businesses engaged in activities or practices that might conflict with your social or spiritual values. For example, by building a portfolio that tracks the S&P500 or Russell 3000 indices, you are by default allocating to industries that you might judge undesirable. Instead we can use a combination of passive and active strategies to build portfolios that avoid investing in industry sectors or companies involved in any or all of the following undesirable sectors: pollution, pornography, tobacco, certain weapons, etc., or positively adhere to your prescribed religious values.
OTHER CHOICES
"ACTIVE YET SELECTIVE" PORTFOLIOS
Portfolios built with a fund-of-funds approach and which actively pursue excess return and alpha over the relevant indices in a few select asset classes, albeit at a higher cost than pure passive ….
… a good choice if you want to selectively venture beyond traditional passive investing or if you want to make a gradual transition from active to passive investing. In general these portfolios are a complement rather than a substitute for passive portfolios. In active portfolios we prefer to employ certain asset classes such as commodities, convertibles or emerging market bonds, where there is a higher likelihood of alpha or excess return even after higher cost.
"TRADITIONAL PASSIVE" PORTFOLIOS
The lowest-cost purist passive portfolios built with traditional index funds and ETFs to tightly track the relevant market indices...
… a good choice for purist passive investors who believe strongly in the efficient market hypothesis. Classical passive investing has gained much popularity in the past two decades and has a laser focus on cost cutting -- the key to the passive investment thesis is that markets and returns are unpredictable, but costs are a certainty, thus by cutting cost you directly increment your long-term return. There is abundant evidence that active fund management in mainstream liquid asset classes like developed market equities or fixed income does not outperform a simple index-based portfolio after accounting for costs. However, in the past few years a new generation of smarter alternative indices have emerged which can deliver higher returns, even after slightly higher costs, hence we recommend investors build smart passive portfolios with non market-cap weighted "smart beta" indices that deliver factor risk premiums. But for investors who are unconvinced about this relatively recent industry innovation and prefer to stick with the tried-and-true pure passive investing model, we can easily implement a traditional passive portfolio at the lowest possible cost.