At Aspera, we have
a common sense view of risk.
- Risk is paying too much for a security.
- Risk is not thoroughly understanding the
securities you own.
- Risk is not exploiting all available asset
classes.
- Risk is ill-conceived over-diversification.
- Risk is buying and holding regardless
of valuation and fundamentals.
- Risk is not knowing when to sell.
- Risk is not sticking to your investment
discipline.
- Risk is following the herd, chasing yield,
and chasing performance.
- Risk is not taking
advantage of more sophisticated portfolio strategies.
We take risk management very
seriously, but we have a very different view of risk than most
investment managers. At the security level, most advisors equate
risk with volatility. In other words, the more volatile the price
of a security, the riskier that security is. At the portfolio
level, they view risk as a diversification issue - spread your
portfolio across enough asset classes and securities and you'll
reduce your risk.
Given our focus on fundamentals
and valuation, short-term security price fluctuations have no
bearing on our view of security risk. In fact, we view volatility
opportunistically. It allows us to add or reduce positions at
attractive levels. At the portfolio level, we believe that over-diversification
is a recipe for mediocrity which primarily serves to protect the
advisor at the expense of responsible portfolio growth and wealth
preservation.
We believe that our approach
to risk management results in superior risk-adjusted returns.
We manage risk by strictly controlling security, market, and asset
class exposures. In addition, we only invest in attractively valued
securities and asset classes. We do not add securities to a portfolio
solely to increase diversification. If we are unable to find an
adequate number of attractive opportunities, we keep excess funds
safe and liquid and await better opportunities. In addition, we
employ hedging strategies as appropriate to better manage risk.
