Our investment philosophy and process, called Risk Aware Investing, helps us to understand and manage risk so our clients can use it to their advantage. Risk Aware Investing allows for a portfolio to reflect current market conditions and adapt opportunistically to those conditions. The aim is to prepare a portfolio for each specific day, not the average day.
In order for us to effectively manage portfolio risk, we must measure it. Our analysis of the markets has led to the creation of three key areas for measuring risk: price movements, investor sentiment, and economic environment. These areas are further broken down into the following categories to provide us with the data we need to gauge risk.
Each of these areas is modeled, then combined to determine the overall risk level that is present in any given market. This approach means that no single data point determines the outcome by itself.
The metrics created to describe each area provide objectivity to the investment process. This objectivity counters the influence that opinions and emotions would otherwise have on investment decisions.
Our process eliminates the need to react to most, if not all, unexpected economic or geopolitical events. If an adverse event occurs when our measure of risk suggests we are in a positive environment, the events tend to not have much impact on stock returns. If the event occurs during a negative environment, as suggested by our models, our portfolios have already been adjusted to a lower risk asset holding to reflect the negative environment and do not require additional adjustments.