What Sets Us Apart
Many portfolio managers use a subjective process focused on their opinion of the quality of a company and its senior management rather than the investment merits of the underlying stock. However, our extensive research has shown that these types of "good" companies don't consistently make good investments. Furthermore, emotion and human nature can often lead people to make poor decisions when faced with numerous disparate data points, particularly during periods of market turmoil. To counter this, our models are constructed on a foundation of decades of testing to ensure that we only use those factors that best predict future performance, and we apply our buy and sell strategies mechanically to avoid falling victims to our own behavioural flaws.
Passive management has also grown in popularity over the past few years, as investors have started to question the ability of active portfolio managers to justify their relatively high fees. The idea here is, why not simply accept the index-like returns offered by ETFs and save money by minimizing the costs? In our view, this approach is not an investor's best option since it assumes that all active investment methodologies are doomed to underperform their benchmarks. Even in the case of “smart” ETFs that use factors other than market cap to select and weight their positions, performance is often limited on the upside since these models must be designed to accommodate a high level of assets to make them profitable due to their low management fees. In this case, these second-generation ETFs are constrained in terms of the number of stocks in their investable universes, and they are less nimble due to their large size. For our strategies, we believe that limiting fund capacity greatly improves the likelihood that our funds will generate superior long-term performance.
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