We’ve studied the psychological and emotional elements that impact everyone – professionals and non-professionals alike – and can impact investment programs. We get our clients on track and help keep them on track as the never-ending stream of worrisome world events threaten to derail their investment success.
A significant component of our risk management program incorporates behavioral finance. Individuals hold personal beliefs and biases that can influence decisions in a less than rational manner. The field of applied behavioral finance is dedicated to risks and market anomalies generated by biases that individuals hold. There are roughly 20 biases that can influence an individual’s decision-making process as it pertains to the ongoing management of their wealth.
The biases are broken down into three groups: 1) belief perseverance 2) information processing 3) emotional based biases. The biases are of significant concern because an individual is typically unaware of the presence, frequency and/or magnitude of the influence. Subsets of these biases are more likely to be found in one personality type than others, but in almost all cases the biases are hidden within the individuals “blind spot”.
SOCIALLY RESPONSIBLE INVESTING - ESG (Optional Overlay)
For individual investors with a personal desire or organizations with a moral obligation, we offer a socially responsible portfolio overlay. Recent innovation within the financial industry provides us with the opportunity to deploy our sophisticated investment approach and risk management process under this overarching theme.
Historically, asset managers would simply screen out certain types of stocks from their existing portfolios, (the SIN stocks – companies related to tobacco, gambling...etc) and call the resulting portfolio socially responsible. The problem with this method is the resulting portfolios usually had poor investment performance and very poor risk management characteristics.
A more recent development to meet this need includes ESG investing for people & groups seeking socially responsible features in their investment portfolios. ESG means environmental, social and governance, and takes into account a broader set of factors to evaluate the responsible nature of the investments.
For investors choosing this optional strategy, we take these recent offerings in ESG, then perform our investment and risk management processes, along with our behavioral finance overlays to produce, from our inception as a firm, an offering for investors that want a socially responsible approach but also want it in a risk managed, sophisticated portfolio.
We think this will be particularly helpful to those organizations where the board members are balancing the objective to abide by the organizations mission to invest in a socially responsible manner and their own fiduciary duties to guide the organization in a fiscally responsible manner.