Investment PhilosophyApproach

A consistent, reliable and successful investment experience for every client.

At WARR HUNT, we do not predict the future in order to have a successful long-term investment experience.  We believe in 5 key principles that bring consistency, reliability and lower cost to our clients.

Capital Markets Build Wealth

Markets throughout the world have a history of rewarding investors for the capital they supply.

Companies compete for investment capital, and millions of investors compete to find the most attractive returns. Markets quickly incorporate information from this competition into security prices.

Traditional investment approaches strive to beat the market by taking advantage of pricing “mistakes” and attempting to predict the future. Too often, these approaches prove costly and futile. Predictions go awry and managers may hold the wrong securities at the wrong time, missing the strong returns that markets can provide.

Meanwhile, capital-based economies thrive - not because markets fail but because they succeed. Investors expect a positive return on the capital they supply, and historically, the equity and bond markets have provided growth of wealth that has more than offset inflation.

Invest, don't speculate

“Pundits forecast not because they know, but because they are asked.”

John Kenneth Galbraith (1908 - 2006).

The futility of speculation is good news for the investor. It means prices for public securities are fair and that portfolio structure, not mispricing, explains differences in average returns. It is certainly possible to outperform markets, but not without balancing risks and costs against expected returns.

Traditionally, money managers do one of two things: They focus on picking individual securities, or they attempt to mimic the performance of arbitrary benchmarks.

Over time, only a small percentage of money managers outperform the market after fees, as shown in exhibit 2, and it’s difficult to identify them in advance Canadian-American economist and author.

WARR HUNT chooses a different path. Rather than speculation or the need to track commercial indices, we design strategies based on research.

Focus on known factors of return

We pursue higher expected returns through low-cost, tax efficient, well-diversified portfolios.

From over 50 years of capital markets research, we have gained a powerful understanding of the factors that generate higher expected returns.  A factor of return must demonstrate persistence through time and pervasiveness across markets, and is cost-effective to capture.

Much of what we have learned can be summarised in simple terms. First, equities (shares) have higher expected returns than fixed interest (bonds).

Equity markets effectively apply different discount rates to shares to reflect differences in underlying risk. Company size and relative price are variables—or factors—that allow us to identify differences in these discount rates.

In fixed interest, two factors largely drive relative performance: term and credit. Longer-term bonds are more sensitive to unexpected changes in interest rates than shorter-term bonds. Bonds with lower credit quality have a greater risk of default than bonds with higher credit quality.

Diversify Broadly

By holding a globally diversified portfolio, you are positioned to capture returns wherever they occur.

Investment success begins with a sound asset allocation – one that matches both financial goals and tolerance to risk. By considering how much each equity and fixed interest factors to target, investors can adjust the total expected return profile of their portfolios to support their goals.

Successful investing means not only targeting factors that generate higher expected returns, but also managing risks that may needlessly compromise performance. Avoidable risks include holding too few securities, acting on market predictions in areas like interest rate movements, and relying solely on information from third-party analysts or rating services.

Deeper diversification involves geographic and asset class diversity. You never know which factors or markets will outperform from year to year.

Stay Disciplined

“The investor’s chief problem—and even his worst enemy—is likely to be himself.” — Benjamin Graham, The Intelligent Investor 1949

Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions at the worst times.

Daily market news and commentary can challenge your investment discipline. Some messages stir anxiety about the future while others tempt you to chase the latest investment fad. When tested, consider the source and maintain a long-term perspective.

Sustaining investment success is also achieved by disciplined rebalancing. As markets rise and fall over time, disciplined rebalancing means selling asset classes that have increased in value and buying other asset classes that have decreased in value relatively.

Our evidence based Enhanced Asset Class Investing approach is based on the science of capital markets, and we apply decades of research to practical investment strategies to help investors benefit from what the capital markets offer.

Sustainable Investing

We believe every investor should have the choice to invest in a sustainable way.  Our commitment to Sustainable Investing solutions for our clients is grounded in both our investment philosophy and the use of a systematic approach balancing the need for a robust investment return with the objectives of Environmental and Social responsibility, along with sound Governance.  Through a rigorous screening process, investors have the benefit of a more sustainable investment portfolio.

Security and Custody

All assets managed on behalf of our clients are held with a custodian on trust for our clients. Importantly, they are not attached to our assets and liabilities nor those of the custodian or investment managers.