Our fundamental investment principles are diversification, valuation, and a thorough understanding of risk. To these we add several functional principles relating to client focus and client service. Together they add up to a clear and consistent approach to investing, guidance and service: The Verus perspective.
Institutions have obligations that must be met, so policies and portfolios must be designed, first and foremost, to meet those liabilities and enterprise objectives.
Allocation of assets and risk exposures are far more important to achieving long-term enterprise objectives than manager selection or tactical trading. We focus our time and resources on these crucial decisions.
Understanding the sources and dynamics of global GDP growth, fiscal policy, monetary policy and inflation are essential to designing an effective strategic investment policy, because these factors create the environment for investing over a given period. The relative valuations of asset classes ebb and flow as the supply and demand of capital changes. Understanding valuations and the factors that influence them is crucial because the price an investor pays for an asset largely determines the result of the investment.
Most institutional portfolios are not as diversified as investors believe. Not only do asset classes share common risks but their correlation tends to rise in times of crisis, just when investors need diversification the most.
At Verus, we measure and evaluate diversification by many different perspectives, including economic regime and critical risk factors, and complement classic mean-variance optimization models with proprietary scenario analysis, stress tests and measurements geared to each client’s specific objectives.
Investments need not be complex or expensive to be successful; low-cost beta allocations often drive the majority of investment results. Yet institutions frequently pursue expensive alpha-based strategies to little advantage. At Verus, we believe that all investment management fees and trading costs should be justified and expertly managed.
We remain acutely conscious of the fact that our first responsibility is client service. This awareness informs the principles above as well as day-to-day client interaction. Verus has been consistently rated in the top quartile for client service by Greenwich Associates for more than ten years.
Surrounding these principles is a healthy dose of humility. We cannot see the future; we can help our clients be prepared. Our perspectives on risk and diversification help to defend portfolios against disruptive events, while our focus on valuation aids the pursuit of opportunities.