The source of all profits in investing and the world at large is the hard work and ingenuity of people. As countries and continents become more interconnected, more people from all over the world are able to contribute more than ever to the global economy through their ideas, productivity and consumption.

We begin by surveying the entire world for investable asset classes, removing those that do not have enough liquidity or accessibility to make the cost of investing worthwhile.

Estimating the size and frequency of an asset class’s largest losses helps us find portfolio weights that can minimize the impact on a portfolio. We also look at multi-period returns (geometric average) in order to take into account the reduction in returns caused by volatility over time.

Once we have developed a range of optimized portfolios we begin to look for investments that in combination will provide the exposure to each asset class that our portfolios call for. In selecting investments, we look for tax efficiency, low transaction costs, and reasonable management fees given the style and type of the investment. We include a well-diversified group of asset classes in our portfolios so that they are able to benefit from a consistent rebalancing strategy and maintain the proper risk exposure

We also look for ways to improve the risk and return trade-off of the asset classes in which we invest. These can include passive indexing, alternative indexing, active managers, option strategies, or individual securities. While we believe that markets are generally efficient and that short term attempts to beat the market generally become unprofitable due to taxes and transaction costs, we also believe that there are factors such as company size and valuation that provide exploitable opportunities at low cost over the long term.