We invest our clients predominantly in mutual funds.
Mutual funds are often confused as being a separate asset class, when they are in fact a vehicle for investing in various asset classes such as stocks or bonds. Mutual funds are pooled investment vehicles that are widely accessible. They offer a high degree of transparency, have independent boards of directors, and are available at affordable prices (for our writing on investments with a lack of transparency click here). Some mutual funds are run with acumen and talent that we believe is similar to that which is available from the very best institutional managers and hedge funds.
We are principally interested in those managers that offer an investment strategy aligned with our own: a long-term value perspective, and a level of tactical asset allocation that recognizes some moderate degree of nearer-term opportunities. The managers our clients are invested in are all run by teams aligned to a value discipline — they buy things they think are on sale. They also typically invest in more than one asset class — for example, international bonds and foreign currency-like notes, or international stocks and cash and gold. The moderate tactical allocation of assets within the funds, along with their value discipline, means that the managers, with us at the reins, are like an aligned team all pulling in the same direction. The fact that part of the asset allocation of client portfolios is done by these managers means that client portfolios are nimble, flexible, and guided day to day by a larger set of disciplined minds.