We view risk as the permanent impairment of capital. To manage this risk, we employ four main strategies:
Start with an Excellent Foundation: Culture and the Decision-Making Environment
We believe a significant risk exists when ideas which may have the potential to preserve client capital are left unexpressed or unacknowledged. To harness a diversity of perspectives, we cultivate an environment that is open, candid, respectful, and free of hierarchy. It’s our belief that this type of culture encourages our team members to contribute more freely and fully to the decision-making process.
Focus on the Fundamentals: Security Level
We believe that systematically following our investment philosophy and process is essential in reducing overall risk. In other words, starting with only high-quality companies that are resilient and by being disciplined on the price we pay for them. There are no shortcuts. We follow a rigorous process to evaluate critical sources of information—from scuttlebutt to forensic accounting to delta report—striving to leave no stone unturned.
Protect us from Ourselves: Portfolio Level
At the portfolio level, we diversify our holdings to ensure resilience and impose constraints on each strategy, restricting single security and industry weights.
Consider the Big Picture: Systemic risks and themes
While the majority of the investment process is bottom-up in nature, building resilient portfolios requires an awareness of the macro backdrop. Our weekly risk management meetings, our open culture, and our semi-annual risk management report all seek to promote situational awareness, highlight thematic or macroeconomic exposures, and determine if there is any unintended exposure that requires addressing.
