We believe “risk” is the prospect of permanently losing money. This is in contrast to most of what we read and hear that risk is measured based on the volatility of an asset, or how much it bounces around. The problem with volatility as a measure is that it doesn’t properly measure the impact of “losing years”, or “drawdowns”, on the compounding of your wealth. And losing years are what really hurt your portfolio’s ability to grow over time. At Purpose, we are not just providing “beta” or “market exposure”, riding the ups and downs of the market. Many of our products have risk management strategies designed to either avoid losses or drawdowns in your investments.
How we View Risk
- Effective risk management
is an essential component of every investment strategy.
- It’s not good enough to just provide the “Market Return”, but unfortunately that’s what most people do.
Managing risk means being willing to ignore the urge to need to provide the market return.
- Long term returns are geometric. If you lose 25% on your portfolio, you need to make 33% to get back to even.
This simple principle means the greatest opportunity to compound long-term wealth is by preserving capital during down markets (i.e. drawdown risk) not by trying to beat the market during hot markets.
- Our products bring the best in “Institutional Risk Management” to the public.
They are built using technology and principles used by the most sophisticated investors in the world.
- Many of our funds have a mandate to provide dynamic market exposure.
We hedge market exposure and/or use multi-asset diversification to manage portfolio risk in order to protect investors’ capital.
- Proper diversification is paramount to success.
All Purpose Funds have strict rules around asset class, security and sector exposure, with disciplined and regular rebalancing rules.
- We believe you don’t have to trade off low fees to achieve risk management.
Providing risk management strategies for a low fee is what we built our business on.