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Portfolio Management

Top Down Investment Analysis, Bottom Up Portfolio Construction (What does that mean)?

There are two ways to make money in the markets: to hunt or to farm.

We prefer to farm, to cultivate returns for clients, focusing on long-term yield rather than short term gains. We focus on the concept of Total Return, where a portfolio will benefit from a combination of price appreciation and income generation.

All good portfolio management begins and ends with this premise... The essence of portfolio management is the management of risks, not the management of returns.

(Benjamin Graham, The Intelligent Investor, 1949).

How We Work

Step One:  Consider Economic Conditions

First, when considering global, regional, and national economies we ask: Are we in a period of economic expansion or economic contraction? How does the current economic landscape encourage or discourage future economic activity?

Step Two: Sector Analysis

Using the Global Investment Classification Standard (GICS) companies and associated investments have been divided into 11 economic sectors. Given the Economic conditions we considered in Step One, do any particular sectors have an advantage over any others? Within each sector, do any particular stocks have an advantage over others? Within each sector, do any particular stocks have a higher market risk over others? 

Step Three: Client Mandate, risk considerations, investment selection

All of our decisions together have everything to do with where you want to go and when you need your investment to pay out. What are your needs? When do you need the money? Where should we invest to minimize risks?

When selecting a portfolio of investments, we look at:

  • What is the general risk in each market sector?
  • What is the risk for a specific stock?
  • Should a decision be made regarding the type of security (i.e. stock, bond, preferred share)?

Step Four: Bottom up portfolio construction

When constructing a portfolio that will work with you, we look at risk and return. That means what is the total return among each of our portfolio selections*: how will interest and dividends contribute and what adjustments will we need to make when things rise and fall? We also want to limit risk by using directional hedges to balance adverse market moves and 'non-correlated assets' (that’s a big-sounding term to describe stuff that moves differently than the rest of the market). 

*Past performance does not guarantee future results, and all investing involves risk.

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