Investment Management

What is Investment Management?

In order to have long-term financial and investment success, it is imperative for an investor to know what it is that they believe about the markets. After a market belief is determined, a strategy can then be implemented to seek the best long-term results.

The philosophy must be developed first; the strategy is then the implementation of the philosophy.

The Aubry & Eustice Investment Philosophy is based on the following precepts:

Markets are efficient

Markets throughout the world have a history of rewarding investors for the capital they supply. Companies compete with each other for investment capital, and millions of investors compete with each other to find the most attractive returns. This competition quickly drives prices to fair value, ensuring that no investor can expect greater returns without bearing greater risk.

Risk and Return are related

The evidence is clear and undeniable: returns come from risk. Gain is rarely accomplished without taking a chance; but not all risks carry a reliable reward. Financial Science has shown us which risks are worth taking:
• Stocks have a higher expected returns than fixed income
• Small company stocks have higher expected returns than large company stocks
• Lower-priced “value” stocks have higher expected returns than higher-priced “growth” stocks

The level of return for each investor is unique. Some investors are more risk-averse, while others seek risk. The level of risk each investor is willing to take is dependent on a wide variety of factors, such as current and future income needs, current economic conditions, or even personal investment experiences in the past. It is important to understand your tolerance for risk to maximize the level of return for your investment portfolio..

Diversification is essential

Diversification is a method of reducing risk by pooling a wide variety of investments within a portfolio. However, to have a successful portfolio, diversification needs to go beyond a cluttered mix of various investments. Portfolios should be spread among various investment vehicles such as equities, fixed-income, cash, etc. Within each asset class, the securities should vary in the level of risk they carry. Investing in only blue chip stocks or government issued treasuries will limit your ability to reduce risk while attempting to increase expected returns. Variety is essential, but it must also be done in a structured manner.

Structure determines performance

Structured management is so named because of the structure of the engineered portfolios. They follow a passive approach to investing, are built along multiple dimensions of risk and return, hold fast to the principle of diversification, and are meticulously designed to minimize costs and incidence of capital gains tax. Aubry & Eustice utilizes this investment strategy to deliver the highest possible expected returns through portfolio design and trading with the lowest possible volatility and transaction costs.

Seek to capture the dimensions of meaningful risk factors

It is the assertion of Aubry & Eustice that the road to investment success lies in identifying the risks that bear compensation, choosing how much of these risks to take, and then striving to minimize the risks and costs imposed by traditional approaches. Science-based portfolio engineering makes this possible.

Minimize costs

“Transaction costs represent one of the largest erosions of investment value that investors face. We believe it is often the very largest barrier to superior performance.”
– Wayne H. Wagner, Chairman of Plexus Group.
Aubry & Eustice strongly supports this statement. Research has shown that these hidden costs of investing can erode investment value anywhere between 3 and 8% annually. However, the platform that we use works to keep trading costs well below that.

No one can accurately, consistently and predictably outperform the markets by actively buying and selling stocks

There is no crystal ball. The impressive amounts of historical evidence is strongly against those who still believe it is possibly to consistently grow wealth by picking stocks, timing markets or make decisions based upon a “hot hand.” This is investing; it is speculating or, more aptly stated, gambling.

Fiduciary Responsibility

It is our responsibility, by both government fiat and moral conviction, to make decisions based upon what is in the best interest of our clients.

Investment Strategy

The Investment Strategy used by Aubry & Eustice is known as Structured Investment Management. Structured Investment Management is based on the hybridization of the Modern Portfolio Theory, the Efficient Market Hypothesis and the French/Fama Three-Factor Model. This Strategy places an emphasis on global diversity in order to reduce the overall risk of a portfolio and thus enhance long-term portfolio returns.