Risk and Return

Our commitment to the well-established conclusion that in the long-run capital markets work dictates all we do. In well-functioning markets, the buyer has the same information as the seller, prices quickly reflect new information, and new information comes randomly, thus:

• No identifiable trends or bias in price patterns appear;
• Returns come only from bearing risks that can’t be diversified away;
• Costs matter; and
• On average, managers will underperform any well-constructed benchmark.

Applying this philosophy to investment management means:

• Realizing market returns at minimum cost will result in superior performance;
• Active trading nearly always results in higher costs and underperformance in the long run;
• Most performance is explained by a strategic asset allocation; and
• Results must be periodically measured against established goals in a straightforward and understandable way.

Our approach is to construct client portfolios that achieve the full returns that markets provide by avoiding unreliable speculation and maintaining a relentless focus on costs. The objective for all clients is to provide a well-diversified portfolio that has the greatest probability of achieving an established return objective at a minimum level of investment risk.