As a reminder, and as a message to those who may have missed the last quarterly letter, the text content of this and all future editions will be considerably shorter than in past letters. This change will allow the Arete Quarterly to be more focused on portfolio analysis and will also facilitate much more regular publication of general commentary through the Arete blog. If you haven’t visited www.areteam.com/blog yet, please take a look when you get a chance.
One of my projects over the summer was to refresh and improve the presentation I use to talk about Arete with prospects and interested parties. When I founded Arete, I really focused on thinking freshly about how things could and should be done instead of mindlessly following convention. I wanted Arete to be something special, not just a slightly different iteration of a model I already knew didn’t work well.
As I conducted marketing research, studied the industry, and formulated the value proposition, it became clear that my perspective encompassed trends and changes affecting the entire investment industry. Because of this fairly unique strategic perspective, and because it is difficult to understand Arete’s proposition without it, I am emphasizing the notion of a fresh perspective with the title, “Reimagining money management.”
For starters, this update addresses much more directly some of the important dynamics occurring in the landscape for both investing and investment services. I see the investment industry on the cusp of fairly dramatic change -– most of which centers on the notion of sustainability.
Although I think many investors also sense this to be the case, they still often frame questions and discussions around what has worked in the past and not around what is likely to succeed in the future. When I get a chance to talk about the investment environment and the implications for investors first, everything about Arete makes a lot more sense. Notably, these ideas seem to resonate especially deeply with those whose own money is on the line.
Another thing I want to accomplish with the presentation is to highlight the central activity of knowledge management at Arete, but also at all good active management firms. Despite flawed execution by many, active management remains the R&D center of the industry because it is really the only business that focuses resources on developing proprietary insights to such a high degree. People don’t go to paralegals for litigation representation or to medical equipment sales reps for surgery and yet that is effectively what happens in the realm of investing all the time.
This disconnect is unfortunate because it leaves many investors significantly isolated from extremely important sources of investment expertise such as active managers. While investment performance over time is certainly important, I don’t see any reason why the relationship between investor and investment expert should be so narrowly defined. As a result, I’m spending a fair amount of effort to come up with new and creative ways to share information and useful insights with investors in ways that extend well beyond just the performance of Arete’s mid cap strategy. If you have some ideas, I’d love to hear them!
When I do get the chance to describe Arete’s research process in greater detail, one of the interesting things I find is that people are often surprised by the depth of analytical work and by Arete’s different perceptions of market drivers. The vast majority of the time I have found the process of sitting down and reviewing different assumptions and evidence to be a mutually beneficial exercise. Investors get a chance to see the investment landscape through my eyes and often gain incremental insight and perspective. I often come out with a better understanding of where problems exist and often gain an advocate for Arete.
With this work essentially complete, the next step in this endeavor is to get out over the next several months to tell the Arete story. If you have any interest in hearing it, or know someone who might, please let me know. I’d love to be able to describe my views of the investment environment and all of the reasons why I think Arete provides a better way to invest.
Thanks and take care!
David Robertson, CFA
CEO, Portfolio Manager