Our Take On Risk
Controlling the Controllable: While asset performance is wholly out of an investor’s control, Fort Point’s investment discipline is grounded in identifying those variables that we can optimize to increase client returns: risk, liquidity, tax efficiency and cost management. Owning a portfolio of assets that behave similarly over time (and particularly in times of stress) increases the risk of catastrophic, coordinated drawdowns.
The tradeable stock or capital stock of a business entity represents the original capital paid into or invested in the business by its owners. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value. The growth of equities correlates to the underlying growth of the business.
In contrast to global assets, these are tangible or physical assets in nature (eg. real estate, commodities, stamps, art, radio frequencies, water rights).
Yield & Rates
Securities issued by governments or corporations, which pay a fixed or variable interest rate at regular intervals and repay principal on maturity.
Investment techniques and strategies that either capture risk premia (beta) and/or obtain excess returns (alpha) with low overall correlation to the securities in which they trade (ie. equities, commodities or bonds).
Fort Point allocations consider both quantitative (number and correlation of assets) and qualitative measures (exogenous events that impact volatility). We actively monitor and rebalance asset exposures to most efficiently enhance portfolio diversification and the probability of a consistent, positive return experience.
Our Approach to Allocation
Superior asset correlation and breadth of underlying diversification are key to achieving positive expected returns with reduced risk. Note below the correlations to the S&P 500 over a 3 year period from a standard allocation to a core allocation and, optimally, to our Active Risk Management allocation.
The traditional advisor approach to portfolio diversification is a blend of equities, fixed income and cash. This strategy works fine in a bull market but, without due attention to asset correlation and dynamic rebalancing, is a perfect setup for substantial, coordinated losses when the market turns.
More than 48 distinct securities are selected across the entire spectrum of asset classes, geographies and strategies to achieve capital appreciation while mitigating market drawdowns. We focus on liquid investments to dynamically rebalance our portfolios for active tax-loss harvesting.
Active Risk Management
Despite broad diversification, highly correlated assets coupled with market volatility leave portfolios over-exposed at precisely the wrong time. We employ an enhanced option overlay strategy to systematically reallocate in any market environment, thus offering investors the benefits of broad-based index investing with superior risk management.
If Investment Advisors compete for your business, so should the platforms that service it. A custodian, for example, can be an invaluable partner in dynamically managing, administering and overseeing institutional
investments. We select our institutional partners by their ability to provide a stable platform while reducing your explicit and implicit costs, ensuring clients receive the execution and value they deserve.
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