Risk is the one constraint that all investors have. We believe an investor’s reward should be proportionate to the amount of risk their portfolio takes on and that long-term returns are best achieved by managing risk through a diversified strategic asset allocation. We strive to construct portfolios with an awareness of the origins of risk. This knowledge informs our decision-making and ensures our guidance is intentional.
Diversifying among different assets and segments of the market does not always ensure effective risk mitigation.
High correlation among assets may introduce additional downside risk, especially during stressful market events.
Less-correlated assets equate to portfolio diversification.
- Different assets may share similar sensitivities to risk factors.
- Portfolios with high concentrations to any one risk factor may increase the potential and severity of an unexpected loss.
*Factors are characteristics specific to a group of investments that help explain return and risk.