Our portfolio management philosophy stems from a dual mandate to achieve our client’s financial goals, as well as their social and environmental impact objectives. To satisfy this directive, we have developed an investment strategy that is unique in our industry. We apply a modified Risk Parity model with a prudent, fiduciary process, to seek competitive financial returns along with real impact.
Risk Parity Impact (RPI)
Risk Parity has been an industry-leading portfolio management methodology for many years, widely credited for its track record of lowering volatility during turbulent markets*. Our firm has modified the classic Risk Parity model by applying a socially responsible investment philosophy throughout the process. As a result, our models emphasize downside risk protection by diversifying volatility across multiple asset classes, while staying true to our namesake.
Our goal with the Risk Parity approach, is to truly diversify our investments, considering each asset’s volatility and correlation to one another, in order to create a portfolio that can weather any market environment, regardless of an expanding or contracting business cycle, and during high or low inflationary periods. From this process, we have developed six basic models, ranging in their weight in equities, fixed income, and alternative assets, in order to meet each of our client’s investment risk tolerance and time horizon.
Portfolio Management Process
Our investment committee meets quarterly to monitor our performance and strategy in light of the current market environment. We follow a disciplined process that continuously seeks to improve our model allocations along with each investment within them. For each position, we base our decisions on the individual client's core impact criteria, using fundamental analysis and low-cost passive investment strategies. For each model, we are weighing market and economic conditions along with each client's taxes and objectives to make the fluid decisions about rebalancing the allocations.
We consider our clients' social and environmental priorities and tailor their investments according to their criteria applied across all asset classes within the portfolio, allocating capital only to investments that score in the top of their peer group in each area. This process combines both negative and positive screens with a best-in-class approach.
Furthermore, we perform fundamental analysis on individual companies, funds, and industry groups, by examining their financial statements, details regarding the issuers product line, the experience, and expertise of the management, and the outlook for the industry. We use the resulting data to measure the true value of the asset compared to the current market value. Additionally, we manage for the time delays and shortcomings inherent in fundamental analysis by incorporating additional data points into our analysis.
As an overall portfolio construction technique, we employ passive investment management across asset class categories where we do not see enough added value for the costs of a more active approach. We weight asset class allocations to achieve a desired relationship between their correlation, volatility and expected returns. Investments like index funds or Exchange Traded Funds that can passively capture the returns of a desired asset class, are placed in the portfolio where available and prudent. Passive investment management is characterized by low portfolio expenses, minimal trading costs, and relative tax efficiency.
Fiduciary Duty of Care
We adhere to the highest standard of fiduciary duty by serving our client's financial best interests first and foremost and explicitly above our own. In our view, considering the social and environmental impact of our investments is part of our fiduciary duty of care. While we recognize that no industry, company or individual is perfect, we must set clear intentions and continuously strive for a more perfect process.
To this end, we follow our Code of Ethics as an integral framework that guides our behavior in all we do together as a firm:
Integrity: We shall offer and provide professional services with integrity.
Objectivity: We shall be objective in providing professional services to clients.
Competence: We shall provide services to clients competently and maintain the necessary knowledge and skill to continue to do so in those areas in which we are engaged.
Fairness: We shall perform professional services in a manner that is fair and reasonable to clients, principals, partners, and employers, and shall disclose conflict(s) of interest in providing such services.
Confidentiality: We shall not disclose confidential client information without the specific consent of the client unless in response to proper legal process, or as required by law.
Professionalism: Our conduct in all matter shall reflect credit of the profession.
Diligence: We shall act diligently in providing professional services.
Each member of our team reviews and amends this Code of Ethics periodically to ensure it remains current and that we all stay actively engaged in defining our principles and personal commitments.
*Sender, Henry and Robbin Wigglesworth. "Investing: Whatever the Weather?" Financial Times, Hedge Funds. Aug 23, 2015.