What specifically do you offer?
Why we offer these strategies
We often hear investors say that they want to be invested in equites, but at the same time they “sort of don’t”. Many investors want the return opportunity that equities offer, but often they don’t like the journey.
We understand their concerns. We like being invested in equities when we believe that a particular portfolio offers what we consider to be a high probability of generating significant positive returns over a 12-month time horizon. Where this is not the case, we are quite happy to sit in cash and wait.
This is analogous to the position that Warren Buffett has taken within Berkshire Hathaway in recent years, with a very large cash position. He added significantly to the cash position by selling approximately half of his Apple stock in the summer of 2024. While he has been reticent to explain precisely why he did this, we know from his past statements that he is generally concerned about market valuation. The high cash position reflects a belief that the equity market may be overpriced and he is prepared to wait for an opportunity to invest at lower prices.
Put another way, he believes the probability of prices adjusting lower from prices in 2024 to be more significant. Therefore he will hold cash until better opportunities arise. Our approach is similar to this, albeit our difference from Berkshire are that we will change our portfolio of equities far more frequently than Warren.
In summary, our core investment process is to do the following:
Only be invested when we believe there is a high chance of strong positive returns over 12 months
When that is the case, hold a portfolio of equities that is consistent with the prevailing macro “season”
Otherwise hold cash or defensive assets.
As a result we are absolute return investors before we are equity investors. We believe that we can outperform the market over long periods of time (say five years) but we are more concerned with generating significant positive returns.
We are able to offer clients a version of what we do, simply by holding the benchmark equity index, or a defensive equity position of the client’s choice, when we would otherwise hold cash. The result is a strategy that corresponds more closely to a traditional active equity approach, aiming to produce significant levels of alpha. Obviously one of the challenges with this approach is that the portfolio will generally fall in value when the market does.
Our Macro Approach
We focus on “knowing” the season, and seek to invest in a portfolio of equities consistent with that season
We have written extensively on our macro approach – click here to go to our papers.
But in a nutshell, we believe the following is true:
Equity segments offer the highest return potential. Picking the right part, or segment, of the equity market is more powerful than asset allocation or indeed any other approach to making money. The potential return opportunity between segments is very strong.
Macro offers the best chance of accessing that potential. We believe a significant proportion of this return opportunity is driven by the prevailing macro environment or season (as we call it). Therefore, knowing the season helps us predict what segment will outperform.
Macro and valuation drive likelihood of positive returns. A combination of the prevailing season, together with a portfolio with a valuation advantage, we believe give that portfolio a relatively high probably of outperforming over 12 months. We do not believe it is wise to invest in this strategy without a time horizon of at least that.
When conditions are not favorable we will hold cash. For example, when the season ends, or when the portfolio becomes significantly overvalued, we will adjust the portfolio accordingly.
Otherwise our process is simple – we focus on “knowing” the season, and seek to invest in a portfolio of equities consistent with that season, which are also cheap enough, such that we have a high confidence that over 12 months positive returns will be achieved.
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Global Equity
a Global Equity Strategy, which involves using our macro views to determine which index strategies will outperform in the prevailing conditions and investing accordingly. Based on our assessment of how different segments perform in each condition, we rotate from one set of indices to another as the macroeconomic environment changes. We can offer this strategy at different risk levels.
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Dynamic Equity Growth
a Dynamic Equity Growth Strategy, which is similar to the Global Equity Strategy, except that we build our own indices with concentrated exposure to a smaller number of companies. We tailor the indices to reflect our research into the factors which influence performance in different macroeconomic conditions.
