| Areté Quarterly Q319 |
Business update
Two of the things I always focus on at Areté are the development of useful investment insights and the translation of insights into good outcomes for clients. I see both as areas of significant opportunity: Many investment companies are primarily marketing organizations and don’t even try to generate unique or useful insights; others do generate useful insights but don’t do much to ensure those insights actually help their clients.
In regard to insights, one of my biggest strengths has always been with valuation. Unfortunately, the value of this expertise has been undermined most of the last ten years by the strong preference for growth driven by monetary policy emphasizing extremely low rates. Conversely, such policies have created a windfall for macroeconomists, Fed whisperers, and geopolitical experts who focus more on broad perspectives than security-specific insights.
For a number of different reasons, I believe the time is coming when the importance of valuation work will return. While macro perspectives certainly have their place, companies tend to have notably differentiated experiences and properly functioning markets should reflect that. Go back ten years ago and the vast majority of investment research was company-specific.
As more performance opportunities become company-specific, I would expect the value of fundamental research and valuation work to return. This will be very good for Areté partly because it is where my personal expertise lies, but also partly because so many other shops have discarded or diluted their valuation expertise over time. Collectively, the industry has lost much of its muscle memory for valuation work.
In regard to translation, I also have reasons to believe that Areté is well positioned. While much attention has been placed on fintech toys and new passive funds, investors are increasingly realizing neither of these help navigate challenging investment environments. They just don’t solve a lot of the problems that investors actually have.
Areté’s Personal CIO offering was designed specifically to improve access to investment expertise for the very purpose of solving real world problems. I very much believe that a lot of great investment insight exists. However, investors often do not realize the benefits. Academic research often does not get distributed widely unless it is incorporated into profitable products. In addition, a lot of good research exists but is only available through funds that may not be appropriate for many clients. There needs to be a way to reduce this friction and the Personal CIO offering is Areté’s effort to do just that.
In relation to my broader effort to translate insights into better outcomes for investors, I have been rethinking my communication strategy. Most of what I publish gets distributed through the Areté blog and re-posted on realinvestmentadvice.com. It is also often re-posted on zerohedge.
My focus has been on pulling ideas together for investors. I believe the biggest challenge for most investors is not finding investment information, but rather on curating the stuff that is useful, distilling it into manageable nuggets, and describing what it means for them. In a very important sense, this work is too valuable to distribute for free.
As a result, I am considering a number of different possibilities including putting some of the material behind a paywall, modifying the broadly published content, and migrating to more company-specific and valuation-oriented topics. I haven’t reached any hard decisions yet, but expect to see some experiments.
A related issue is that free, broadly published content can only do so much to help people. The biggest problems arise when people don’t have any idea how far off base they are. They make bad assumptions. They have no idea how many layers of the onion there are. They oversimplify. They focus on the wrong things and overlook the really important things.
There are all kinds of reasons why these things happen but the bigger point is, reading a free blog post is highly unlikely to overcome any deeply rooted problems. The only way those can be overcome is by way of a productive, trusting relationship. Regularly providing useful insights through the blog certainly helps establish that trust, but only goes so far.
Finally, I have been getting settled into Philadelphia and am loving the new digs and the new city so far! Please let me know if you are in the neighborhood – I’d love to get together and talk investments!
Thanks for your interest and take care!
David Robertson, CFA
CEO, Portfolio Manager
Two of the things I always focus on at Areté are the development of useful investment insights and the translation of insights into good outcomes for clients. I see both as areas of significant opportunity: Many investment companies are primarily marketing organizations and don’t even try to generate unique or useful insights; others do generate useful insights but don’t do much to ensure those insights actually help their clients.
In regard to insights, one of my biggest strengths has always been with valuation. Unfortunately, the value of this expertise has been undermined most of the last ten years by the strong preference for growth driven by monetary policy emphasizing extremely low rates. Conversely, such policies have created a windfall for macroeconomists, Fed whisperers, and geopolitical experts who focus more on broad perspectives than security-specific insights.
For a number of different reasons, I believe the time is coming when the importance of valuation work will return. While macro perspectives certainly have their place, companies tend to have notably differentiated experiences and properly functioning markets should reflect that. Go back ten years ago and the vast majority of investment research was company-specific.
As more performance opportunities become company-specific, I would expect the value of fundamental research and valuation work to return. This will be very good for Areté partly because it is where my personal expertise lies, but also partly because so many other shops have discarded or diluted their valuation expertise over time. Collectively, the industry has lost much of its muscle memory for valuation work.
In regard to translation, I also have reasons to believe that Areté is well positioned. While much attention has been placed on fintech toys and new passive funds, investors are increasingly realizing neither of these help navigate challenging investment environments. They just don’t solve a lot of the problems that investors actually have.
Areté’s Personal CIO offering was designed specifically to improve access to investment expertise for the very purpose of solving real world problems. I very much believe that a lot of great investment insight exists. However, investors often do not realize the benefits. Academic research often does not get distributed widely unless it is incorporated into profitable products. In addition, a lot of good research exists but is only available through funds that may not be appropriate for many clients. There needs to be a way to reduce this friction and the Personal CIO offering is Areté’s effort to do just that.
In relation to my broader effort to translate insights into better outcomes for investors, I have been rethinking my communication strategy. Most of what I publish gets distributed through the Areté blog and re-posted on realinvestmentadvice.com. It is also often re-posted on zerohedge.
My focus has been on pulling ideas together for investors. I believe the biggest challenge for most investors is not finding investment information, but rather on curating the stuff that is useful, distilling it into manageable nuggets, and describing what it means for them. In a very important sense, this work is too valuable to distribute for free.
As a result, I am considering a number of different possibilities including putting some of the material behind a paywall, modifying the broadly published content, and migrating to more company-specific and valuation-oriented topics. I haven’t reached any hard decisions yet, but expect to see some experiments.
A related issue is that free, broadly published content can only do so much to help people. The biggest problems arise when people don’t have any idea how far off base they are. They make bad assumptions. They have no idea how many layers of the onion there are. They oversimplify. They focus on the wrong things and overlook the really important things.
There are all kinds of reasons why these things happen but the bigger point is, reading a free blog post is highly unlikely to overcome any deeply rooted problems. The only way those can be overcome is by way of a productive, trusting relationship. Regularly providing useful insights through the blog certainly helps establish that trust, but only goes so far.
Finally, I have been getting settled into Philadelphia and am loving the new digs and the new city so far! Please let me know if you are in the neighborhood – I’d love to get together and talk investments!
Thanks for your interest and take care!
David Robertson, CFA
CEO, Portfolio Manager
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