We conduct a careful and complete review of all the financial and non-financial assets you own. A truly customized portfolio allocation must take into account your liquid assets and concentrated holding as well as your liquid financial assets.

We categorize assets within portfolios into four “genuine” asset classes or verticals, each with particular risk and return characteristics — rather than using short-hand labels such as “alternatives,” which we do not think describe an asset class.

This is done to create portfolios that exploit, when appropriate, co-variances between financial investments and your other asset holdings, all with the goal of achieving a higher expected return per unit of risk or lower risk per unit of expected return or a combination of both.

Many markets are highly efficient and often best accessed through passive or lightly managed vehicles, such as index funds or ETFs. But other markets are less efficient, making talent in investment management critical to success in investing in them. Successful investing combines these more passive investments with highly managed investments and funds where the gains from talent are likely to be greatest. These highly managed funds are run by individuals with the talent and experience to identify investment opportunities that have the potential to produce attractive returns, often with less correlation to the overall market, at any given level of risk and expected return.

Investigation We investigate and use many asset types such as hedge funds, real estate, real asset funds, and private equity funds, which often are lumped together under the label alternatives. But we do so only asset type-by-asset type and fund-by-fund, and we fit these investments into asset classes that we believe better reflect their risk and correlation. We do not make use of funds-of-funds both because they are too expensive and their off-the-shelf, one-size-fits-all structure makes it difficult, if not impossible, to understand the real risk of such investments.

Research Our research process focuses on identification, evaluation, selection, continuous review, and access directly to the highest quality managers those who employ their superior talent in the service of investors.

Allocation We allocate assets among classes or verticals that reflect fundamental risk characteristics. We define the following asset classes: equity-like assets (those highly correlated to equity markets); assets that are not closely correlated to equity markets; real assets (those that adjust for inflation and deflation); and cash and other stores of liquidity.

Within each asset class, we allocate to asset types and managers to create mixes of passive and low-cost strategies with active strategies and managers. We allocate a greater percentage to active strategies and managers when and where we believe talent adds significant value relative to cost.

Monitoring Our system of risk control and oversight is designed to allow us to monitor managers closely and to detect rapidly any deviations from expectations and scope of authority (style). We use a rigorous due diligence process that provides us with feedback on manager performance. Our frequent interaction with managers helps us better evaluate whether each manager is likely to continue to be regarded as among the best in their peer class or to identify potential problems and recommend exit strategies when appropriate.