This runs contrary to most ‘real people’s’ hopes and expectations. Most people are very focused on preserving their capital first and foremost. We manage portfolios with this in mind.
Our approach to investing is not widely followed. Most investors focus on achieving market returns and they manage risk by allocating capital between different asset classes.
The basis for this approach is a belief in 'the market', that it will efficiently price assets, and the job of the investor is to manage the proportion of different assets, called 'asset allocation'. This approach has worked well over the last twenty years, in which we have seen two major bear markets, but bonds have provided an excellent hedge against equity volatility. The fact that this approach has worked in the past does not mean it will continue.
Today, more than ever, traditional asset allocation strategies look vulnerable. Bonds are near all-time highs in terms of the price investors are prepared to pay for them, while equities have risen steadily for the last nine years, and appear to be relatively expensive.
"when prices are high it's inescapable that prospective returns are low and risks are high" - Howard Marks, The Most Important Thing.
Warren Buffet wrote in his 2017 Annual Report:
"If you buy a 10-year bond now you're paying over 40 times earnings for something whose earnings can't grow. And you know, you compare that to buying equities, good businesses, I don't think there's any comparison".
Our approach is to seek investments which place a high importance on 'value'. If an asset class is overpriced, we may not own it. We seek to allocate your capital across a broad range of underlying risk based investment funds, managed by outstanding individuals, generally alongside their own capital, whose primary focus is on risk adjusted returns. These individuals are distinguished at least as much for their ability to control risk as they are for generating returns.