Rethinking Investment Philosophy – Executive Summary

By John R. Minahan, Ph.D., CFA, and Thusith I. Mahanama, M.S.

Why do you think you have a shot at outperforming a passive alternative? This is the central question every active investment manager must answer.

Answering it requires a set of beliefs—an investment philosophy.

This paper takes a fresh look at the critical role an investment philosophy plays in helping today’s active manager define, execute and communicate the underlying beliefs that drive their approach to outperforming passive options. It describes how investment philosophy can be used for both investing and marketing purposes, provides a working definition of what constitutes an active investment philosophy—including key attributes of a viable investment philosophy—and offers views on how a well-articulated investment philosophy can enrich the investment process and facilitate external communication.

Key topics discussed

1. What is an investment philosophy?
We define an investment philosophy as a set of beliefs that guides an investor’s approach to investment management. With respect to active management, we believe a meaningful investment philosophy must, at a minimum, address the manager’s beliefs about: a) How the security pricing mechanism works and why it is that some securities are priced more attractively than others; and b) The skill sets necessary to identify and exploit attractive opportunities before prices move to eliminate the attractiveness of the opportunity.

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Investment Management Roundup – Week Ending 7.10.15

Hope you all had a safe and happy 4th of July weekend. Here are some thought-leadership articles we’ve been reading and thinking about!

#MarketingAndClientCommunication

“The rise of passive investment has made alpha a shyer animal: Do we serve our clients best by simply beating a given benchmark net of fees, asks Allianz’s Elizabeth Corley.”
Elizabeth Corley, Chief Executive | Allianz Global Investors | ft.com | 7.5.15

Allianz’ Elizabeth Corley argues that active management and active fees promise more than alpha. Adding value and fulfilling fiduciary duty require being active client service operatives, providing quality advice and making the necessary investment in client-facing professionals and supporting infrastructure. Check out her excellent article at on.ft.com/1LQ4LVg.

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Investment Management Roundup – Special Edition: 6.5.15

Summer’s finally here! And while living isn’t necessarily easy, it’s sure more pleasant in our neck of the woods these days.

Every summer needs a good reading list, and we’re obliging with a curated list of some of the most popular white papers, published articles and guest blog posts we’ve written over the last year or so. And while we don’t expect you to trade in your newest summer thriller or romance novel, our selections have the distinct advantage of being a) relatively short, b) very readable and c) a quick way to catch up on work-related topics without feeling like you’re actually working!

So enjoy! And don’t forget the hat, sunscreen and sunglasses!

#MarketingAndClientCommunication

Assette Whitepapers
“First Impressions Matter: The Importance of Typography in Investment Management Presentations and Reporting”
Assette | assette.com | 4.24.15

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If your CIO thinks font choice is a no-brainer, you need to read this!

When was the last time your firm updated your client report package or marketing presentations? Most asset managers do a periodic marketing material makeover, but client reports are often an afterthought. And even when doing a makeover, firms rarely pay enough attention to the three pillars of professional presentation materials—color, font and information organization.

At Assette, we see a lot of asset manager presentations and reports, and these pillars are usually neglected in favor of flashy graphics. Lacking a solid design foundation, graphic elements are like runaway balloons—your audience has nothing to ground them, and your messaging is lost. As an industry, we can do better!

First impressions matter

That’s why we launched our “First Impressions Matter” initiative.
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Investment Management Roundup – Week Ending 5.15.15

#InvestmentManagement

“Risk management is biggest concern for institutional investors—survey”
Sophie Baker | Pensions&Investments | pionline.com | 5.6.15

Biggest concern for institutional investors“Increased complexity in risk management is the biggest concern for institutional investors across the globe, a new survey shows. Commissioned by BNP Paribas Securities Services and conducted by polling firm YouGov, the survey found the idea that risk management will become more complex is the biggest concern for 23% of respondents.”
http://bit.ly/1FeaC3V


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Investment Management Roundup – Week Ending 5.1.15

#InvestmentManagement

“Active and Index Funds: How Do They Really Stack Up?”
Christine Benz and Ben Johnson, CFA | Morningstar | morningstar.com | 4.16.15

How Do Active and Index Funds Really Stack Up“… not all passive strategies, not all benchmarks, are created equal. It underscores that understanding benchmark construction, understanding how reflective an index is of the opportunity set that’s available to active managers in a given category is going to go a very long way toward defining whether or not it will look more or less successful relative to an active strategy.”
http://bit.ly/1AlsvrM


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Investment Management Roundup – Week Ending 4.17.15

#InvestmentManagement

“The Real Point of Active Investing: Outperforming the market is not the goal”
Marshall Jaffe | Managing Partner, Jaffe Asset Management | ThinkAdvisor | thinkadvisor.com | 4.6.15

The Real Point of Active Investing

“‘… The goal of active investing is to outperform the market.’
… I cannot count how often I have seen variations on the theme of this apparently sensible observation. There certainly doesn’t appear to be much, if any, argument with its conclusion. It is so ingrained in our thinking and so seemingly obvious that I’ve never come across anyone who was willing to claim that the goal of active investing has nothing to do with outperforming the market.” So I’ll do it: ‘The goal of active investing has nothing to do with outperforming the market.’”

http://bit.ly/1Dk2rSv


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Investment Management Roundup – Week Ending 4.3.15

#InvestmentManagement

“How Social Media Is Influencing Institutional Investor Investment Decisions”
Pat Allen | Rock The Boat Marketing | us1.campaign-archive1.com | 3.19.15

How Social Media Is Influencing Institutional Investor “In November and December 2014, Greenwich Associates, working with LinkedIn, fielded an online survey of 256 global institutional investors including 100 in North America, 105 in Europe and 51 in the Asia Pacific. The survey targeted decision-makers and influencers of investment decisions at their institution (top three titles: chief investment officer, portfolio manager, investment analyst) who used digital platforms at least once in the past year to learn about financial topics related to their investing role.

“ … Most surprising to Greenwich’s Managing Director Dan Connell and [Legg Mason Director] Ryan was that one-third of investors surveyed said they’d taken information learned via social media to start a discussion with or choose to work with a particular asset management firm. This is the first work to document this, I’m fairly certain, and the research may open many eyes.”
http://bit.ly/1IkcYO4


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Investment Management Roundup – Week Ending 3.6.15

#InvestmentManagement

“Lionising star managers undermines value of advice”
Jon Cudby | Editor | Money Management | ftadviser.com | 2.20.15

Jon Cudby“For as long as I can remember, and especially since the RDR, the investment world has been embroiled in an ongoing ‘active versus passive’ debate. To be honest, I don’t really have a problem with ‘active’ or ‘passive’; it’s the ‘versus’ that rankles.”
http://bit.ly/1z5xcUY


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