Areté Quarterly Q223.pdf |
Since I revamped Areté’s core strategy in August 2021, performance has been good, and I would argue good for the right reasons.
I made the change for a couple of reasons. One was that I came to view the investment landscape as being an extremely poor one for capturing idiosyncratic stock performance. Relatedly, I saw that a number of macro forces were driving asset returns that could not be effectively captured by a stock selection process.
As a result, I devised a strategy that allowed me to take advantage of more of the opportunities I saw, that facilitated better risk management efforts, and that I thought could deliver a great deal of value to investors (including myself!).
One of the big changes I observed in the investment landscape was a fundamental change in policy direction. Not only was government policy taking over what had been the nearly exclusive province of monetary policy, but the threat of inflation had fundamentally changed as well.
Despite these changes, most advisors were positioned for more of the same – more low rates, more stocks going up, and more bonds going up. As a result, a lot of investors got hammered in the first three quarters of last year. Areté’s investors did not (see performance disclosures on page 5).
While some of that relative performance advantage has dissipated in the first half of this year, I don’t see the broad investment environment as having changed. This means rates will remain higher for longer and eventually this will serve to deflate the valuation of virtually all financial assets.
The good news is Areté is well-positioned to deal with this. With the All-Terrain Allocation strategy I have the all the tools I need when the going gets tough.
The bad news is this approach is still fairly novel and most investors are not familiar with it. Further, a large proportion of investors have not been burned badly enough, yet, to fully appreciate the shortcomings of their existing portfolios.
Either way, if you, or someone you know, are interested in learning more about Areté, there are lots of ways to do so. For example, I put out the “Observations” newsletter on a weekly basis. Look through the archives and it is easy to trace the course of my thinking as the investment environment has evolved.
I also put out The Areté Quarterly to provide a more detailed analysis of the investment strategy.
Finally, if you ever have questions, or want to follow up on something, you can always reach me at [email protected].
Thanks for your support!
David Robertson, CFA
CEO and founder, Areté Asset Management