Managing Risk is Essential to our Platform



For us, volatility defines risk, because:

  • The risk of volatility is inherent in the equity markets — and that risk is the reason equities deliver higher long-term returns in comparison to fixed income securities.
  • Managing, instead of eliminating, risk can increase investor returns.

Managing risk is critical to achieving your long-term financial goals

Asset classes can be defined in broad terms, such as equity or fixed income, or narrow terms, such as small-cap stock or large-cap growth stock. Asset classes represent different risks and rewards that, when combined, create a diverse portfolio. Asset classes, unlike indexes, eliminate disadvantages such as reconstitution costs.

As illustrated by Graphic 9, the last 20 years of asset class performance has resulted in a diverse return spectrum with no consistent pattern.

Since asset class performances are random, owning a portion of all asset classes is the best strategy to manage risks. Our portfolios are well diversified, combining the risk-return characteristics of multiple asset classes to optimize returns and lower overall risk. Our disciplined asset allocation program is a smart strategy to manage investments in ever-changing markets.

Graphic 9: The randomness of returns shows the importance of diversification