Building Portfolios (10)
Resulting Portfolio
A typical portfolio includes investments in Hard Assets, Global Equities & Tactical Strategies, and Global Bonds. These allocations are determined based on a client’s unique objectives and risk profile as well as our prevailing macroeconomic big-picture view. Some portfolios my also include Unique Private Opportunities.
| Unique Private Opportunities |
Hard Assets |
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| Global Bonds |
Global Equities |
Outside Research
There is a dizzying array of investment choices for investors today: the selection of the investment manager, the various types of investment vehicles such as mutual funds, exchange traded funds (ETFs), separately managed accounts and limited partnerships (LPs), and tax considerations. To efficiently filter the universe of investment choices, we partner with a group of third-party outside research providers and utilize their research recommendations as a starting point for our own analysis and evaluation.
Opportunities with Strategic Partners
We also share ideas with a private network of trusted investment professionals and family offices that we have developed over our careers. This network broadens our access to investment opportunities and gives us valuable feedback in our analysis. Further, we have a strategic alliance with Iridius Capital to provide unique private investment opportunities to clients in the areas of real estate, cross-border international investments and specialty financial services.
WindRock Research
The final filter in selecting specific investment managers and opportunities resides with WindRock. We utilize the best research from outside firms and strategic partners and combine it with our internal research to deliver unique investment opportunities to clients. This entrepreneurial-minded process of gathering the best ideas from a host of trusted sources delivers a superior array of choices for our clients.
WindRock Views
In addition to the views of these experts, we utilize our own insights and experience to identify opportunities and risks in the environment ahead. We seek to identify the macroeconomic path of highest probability while remaining aware of varying outcomes.
Outside Experts
In our world of data overload, there are too many conflicting investment views and opinions for investors to process. Therefore, it is critical to identify a select group of trusted voices and to filter their views into a manageable process. We have identified a group of leading independent forecasters that have consistently gotten the big picture macroeconomic calls right regarding the direction of the economy and stock market. They sounded warning signals well in advance of prior bursting financial bubbles, while most in the industry stood silent. We aggregate these expert views, looking for similarities and seeking to understand differences of opinion.
Entrepreneurial-Minded Research Process
The best investors are independent minds, not beholden to Wall Street influence. We embrace this mindset of creative and independent thinking in our investment process. The outcome of this process is a portfolio of carefully selected investments that offer the opportunity of enhanced returns while diversifying risks.
Permanent problems in the industry
In our view, investors should have little faith left in the mainstream approach to protect them from these severe declines given three permanent problems in the industry:
- An inability to see the big picture
The industry takes comfort in phrases like “markets are efficient” and “no one could see it coming”. In fact, bubbles are often so obvious that experts are blind to them. Most in the industry are so focused on the details of their research that they fail to step back and observe the big picture unfolding. Seeing the big picture through all of the noise requires common sense, adherence to a sound economic philosophy and a keen understanding of human history and behavior. After all, as the philosopher George Santayana prophetically warned: “those who cannot remember the past are condemned to repeat it.” - Misaligned incentives
The industry remains riddled with hidden conflicts of interest and incentive structures that are sales-oriented and not in the best interest of clients. Most investment advisors are not trusted voices for clients, but rather sales teams for Wall Street very far removed from the actual investment research. Further, few advisors share the key ingredient to successful investing – the edge of an entrepreneurial mindset that is found in most prominent business owners and savvy investment minds. - Career risk
Portfolios must look different than benchmarks to beat benchmark performance. Yet, advisors worry that this approach may get them fired in the interim since there is so much focus on short-term results. Most in the industry believe clients may fire them if they perform out of sync with benchmarks. Accordingly, they would rather track benchmarks down 38% when the market is down 40% to be able to say “we did better”. They construct portfolios that over-diversify and do not deviate much from general stock and bond benchmarks because the main risk in their careers is deviating from benchmarks. We think this is the wrong way to invest.
Macroeconomic “Big Picture”
We believe that the “writing is often on the wall” as to the macroeconomic direction ahead. Today, unprecedented government debt and money printing are fuelling what may be the greatest financial bubble of our lifetimes. Despite giving lip service to these issues, the mainstream industry remains largely blind to them and did little to protect their clients from the devastating aftermath of prior bubbles in technology, housing and the stock market. We have asked ourselves, how can an industry full of so many well-educated economists consistently miss what are now deemed to be obvious investment bubbles? We believe this is due to several Permanent Problems In The Industry.
Despite this, there are a select group of leading independent forecasters that have correctly foreseen the big picture and consistently sounded the warning bell well in advance of these bubble bursting. We utilize research from these handpicked experts to shape our own views. By identifying the prevailing macroeconomic trends, we position client portfolios for the environment ahead. It is this ability to position for the big picture that led many of America’s richest families to dramatically increase wealth in the midst of the Great Depression.
Building Portfolios
The construction of investment portfolios follows our investment philosophy, which is rooted in the belief that an effective process needs to combine the best elements of a Macroeconomic “Big Picture” with an Entrepreneurial-Minded Research Process to uncover unique investment opportunities for the environment ahead. Our philosophy has been shaped by our experiences in the industry and two key insights:
- The mainstream industry is largely incapable of identifying the macroeconomic “big picture” and looming financial bubbles, resulting in devastating losses for their clients as these bubbles burst.
- The best results are achieved by thinking differently and straying from the mainstream advice which is still driven by a Wall Street sales culture.
Today, investors are overwhelmed by too many investment views and offerings to consider. WindRock serves to filter all of these top-down macroeconomic views with bottom-up investment choices to bring clients our top recommendations.
| Outside Experts |
Top-Down Macroeconomic Views: We filter expert big picture views into actionable decisions. |
WindRock Views |
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Resulting Portfolio |
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| WindRock Research |
Bottom-Up Investment Opportunities: We uncover unique investment opportunities to fit the macroeconomic environment. |
| Opportunities with Strategic Partners |
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| Outside Research |
Other Services
Our clients benefit from access to services offered through our network of third-party outside providers which may include lending arrangements (mortgages and secured lending), family office services (e.g. bill-paying, concierge services), and connections to leading tax accountants, estate attorneys, and insurance providers, etc.
