Our Philosophy

Our underlying investment philosophy, (that is, our underlying investment beliefs) is the basis for our investment approach.

What are our investment beliefs?

We believe that:-

• Investors are rewarded for taking long-term market risk (eg we believe in active management but recognise that index managers have a role in certain markets).
• Diversification reduces risk (this is the basis of our 'manager of managers' approach).
• Past performance is an unreliable predictor of future investment performance.
• Active management risk is better controlled at the stock selection level than at the asset allocation level.

1. Investors are rewarded for taking long-term market risk

We believe in active management but only in areas where it is likely to add value. This is at the stock selection level not at the asset allocation level. Therefore, we do not believe that tactical asset allocation (TAA) or market timing can consistently add value. Index managers have a role to play in portfolios to manage risk and reduce tracking error (particularly where markets are efficient). Tracking error measures the likelihood (based on historical data) of actual returns differing from market index returns.

2. Past performance is an unreliable predictor

Brand and popularity are poor guides to future performance. We put a great deal of resources and effort into rigorous manager research as the basis for selecting and monitoring managers.

Research has demonstrated that using past performance only as the basis for manager selection is a flawed and ultimately an unproductive investment strategy.

3. Diversification

A core investment fact is that diversification reduces portfolio volatility and risk.

As we operate a specialist 'manager of managers' approach, we achieve diversification at various levels. The combined impact is lower overall risk for investors.