Our investment philosophy revolves around managing the three interconnected pillars of wealth management – wealth creation, wealth preservation, and liquidity. We seek to build and store wealth in private market investments and actively manage risk in public market investment portfolios in an effort to preserve capital and maintain liquidity. By utilizing investment markets for their intended purposes, we broaden asset class exposure, better align with client goals, and mitigate risk.
SEEK OPPORTUNITY.
Invest in Scarcity...
Wealth Creation = Scarce Resources/Ideas + Leadership + P/P/E + Skilled Labor + Investment.
The formula to creating wealth is clear. Begin with a combination of scare resources and/or great ideas. Add entrepreneurial leadership, property, plant and equipment, and skilled labor. Mix in “your” investment capital and stir together to create a great product or service that the market wants or needs.
Whether it is investing in private operating companies, commercial real estate, or the like, our approach to bringing our clients value in private market investments is the same. We seek to align with high quality and transparent firms that have expertise in specific niche markets. Our strategic partners have the ability to make great deals in their respective spaces and we leverage their resources to do so.
While private market investments are often opaque, we place a tremendous amount of effort in the due diligence process vetting firms and investment opportunities. We ensure that sponsors interests are aligned with those of our clients and only work with firms that provide transparency into their organizations and investments.
MANAGE RISK.
The Conventional Wisdom is Wrong...
Modern Portfolio Theory (MPT) has been the overarching foundation of investment management and portfolio construction for over 50 years.
Simplistically, MPT states that investors can reduce investment risk by creating a diversified portfolio of “uncorrelated” assets. While the mathematics behind the theory is sound, practitioners often fail to recognize, and investors fail to appreciate, that correlations between asset classes are not static. In fact, asset classes that are generally uncorrelated often move in tandem during periods of major market stress. As a result, the benefits of diversification, as a traditional means of managing risk, often fail when most needed… a lesson too many investors realized in the early 2000’s and once again in 2008.
How fast would you drive your car on an open road and a warm sunny day? Would you drive the same way if it was windy and raining - What about if it was icy and snowing with near blinding conditions? We think about managing investment portfolio risk in much the same way. Contrary to the conventional wisdom, we believe portfolio risk should be actively managed - not passively observed.
MPT suggests that markets are efficient. Yet, empirical evidence shows that large market declines (outliers) have occurred far more regularly than what a traditional bell curve would suggest. We believe this makes having systems in place to dynamically manage risk all the more important. Contrary to popular belief, evidence shows periods of higher risk can be identified and we manage to such.
Diversification generally works well, but often fails spectacularly when most needed.