"Be Boring. Make Money.™" means ignoring fads and taking a long-term view of investing. It means consistently sticking to a systematic, disciplined, bottom up investment approach no matter what the market outlook. And it means putting the investment odds in our clients' favour by focusing on the things we can control.
“Flying in an airplane should be boring. Heart surgery should be boring. Investing should be boring.”
— Jim Hall, CIO
As bottom up, fundamental investors, we seek excellent securities with sustainable competitive advantages, regardless of industry or economic conditions. We believe that by consistently following our investment philosophy and process we can provide investors with above average, long-term, risk-adjusted returns.
Our equity and fixed income philosophies direct us towards those investments that exhibit the following crucial characteristics:
Equity Investment Philosophy
1. Wealth-Creating Companies
We look for companies that create wealth – companies that earn a return on capital greater than their cost of capital over time by virtue of a sustainable competitive advantage.
2. Excellent Management
An excellent management team effectively allocates capital while expanding the company’s competitive advantage. In addition, these teams are consistent: they have a track record of doing what they say they are going to do.
3. Discount to Intrinsic Value
We seek to find quality companies that are trading at a discount to their intrinsic value--the price an objective, well-informed, person would pay for the company. This turns a great company into a great investment.
Global Bond Investment Philosophy
1. Broadly Diversified
The portfolio is diversified across many different currencies, countries and yield curves. Considerations include a currency’s and country’s contribution to world GDP and liquidity. Similar to a Central Bank, an emphasis is placed on reserve currencies and countries because they tend to hold their store of value in periods of uncertainty.
2. Currency and Country Risk Management
Currencies and countries are separated into key risk factors and analyzed in-house in an effort to identify and manage unfavourable characteristics.
3. Security Selection & Trading
Within the desired currency and country, securities are selected and actively traded with a focus on positive real returns.
Canadian Bond Investment Philosophy
1. Sector Allocation Strategy
We typically overweight those sectors that provide attractive yields relative to Government of Canada bonds. That is, we generally emphasize investment grade corporate, provincial, and municipal bonds.
2. Security Selection Strategy
We actively seek attractively priced securities using in-house credit analysis. Managing credit risk is integral to our style as we seek opportunities to pick up yield through security selection without sacrificing credit quality.
3. Trading Strategies
We monitor bond markets in an effort to identify and exploit mispriced securities. In addition to our own research team, we cultivate strong dealer relationships in order to generate investment ideas and effectively execute on them.
Bayes for days: What to do with signal
We need to ask: what is the best way to deal with new information? Fortunately, there is a tool that can help us with this problem: Bayes’ Theorem.