What is an Investment Philosophy?

As an active manager, you need more than good performance numbers to convince prospective clients that you can outperform passive options. You need a sound argument that’s based on your core beliefs about how the markets work. We believe that your investment philosophy should be the basis of that argument.

Just what is an investment philosophy, anyway?

To answer that question, it helps to go back to first principles. An investment philosophy is a subset of the broader concept of practical philosophy—a set of principles or beliefs that guide one’s approach to specific tasks at hand. “You can never use too much garlic” or “treat others as you would like them to treat you” are good examples of practical philosophy.

So what constitutes an active investment philosophy? We define it as a 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.

To learn more about the benefits of investment philosophy, we invite you to read our recent paper, “Rethinking Investment Philosophy,” by John Minahan and Thusith Mahanama.* Just click on the link below to read an executive summary.


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