Our Investment Process During the COVID-19 Era

About ten months ago, I wrote an article that detailed our approach to investing. In the very first sentence of that article, I wrote: “I love the saying, ‘The more things change, the more they stay the same’ as it can apply to so many aspects of our lives.”

Woah… have things changed.

We are all working from home, dinner from Nite ‘N Gale is takeout-only, and investment markets have seen historic volatility during the last two months. Multiple “circuit breakers” were hit at the New York Stock Exchange, and — for a brief moment in time — the price of crude oil futures went negative. Working to support markets, has been the Federal Reserve and Congress, which have taken unprecedented steps during this pandemic.

Through all of this, I keep coming back to it: the more things change, the more they stay the same. With that in mind, I want to share an update on how our team of investment professionals has responded to the current market environment.

Our Investment Committee

The world might be turned upside down, but our process and approach to investing have not changed a bit. When our investment committee meets, the focus is still the same points that I detailed in the article last June.

  • Emphasis on portfolio construction and asset allocation
  • Continual oversight of strategies
  • Approving the use of new strategies, and terminating others
  • How to implement different strategies in client portfolios

So, while the foundational elements of our investment process have not changed, COVID-19 has changed three things: the cadence of our meetings, how we meet, and the specific topics of discussion.

In the past, our investment committee met once per month. During the COVID era, our committee has been meeting twice per week. This change in cadence reflects the sheer amount of fundamental data that this pandemic has generated.

Additionally, with our office being closed, these meetings now happen on a video conference, allowing our investment team to share their computer screens and discuss strategies and research.

Lastly, COVID-19 has changed the specific and very timely nature of the topics that we discuss. Below is a (very) abbreviated list of topics that we’ve covered during the last two months.

  • Recap of COVID-19 related strategy update calls
  • Review of Federal Reserve actions
  • Tax-loss harvesting strategies and the frequency of rebalancing
  • Summary of economic research from outside providers
  • Impact of low-interest rates on fixed-income investments

Importantly, our investment committee does not, and will never, make predictions about the direction of the markets. The last two months are further evidence that directional moves are not just out of our control — they are impossible to predict reliably. Our investment committee remains focused on what we can control, like how we construct portfolios and allocate assets on behalf of our clients.

Our Approach to Risk Management

Every ten or 20 years, there is an event that turns the world on its head. We haven’t needed to adjust our investment process, because we’ve had this reality in our minds all along. Through our investment process, we try to put these market events into perspective for our clients. It’s the reason why we don’t ask clients how much they want to make in the markets during our first client meetings — we ask them how they would feel if their portfolio declined in value.

Our clients’ unique tolerance for investment risk drives our portfolio construction process, and that commitment remains.

Final Thoughts

I would be lying if I said this wasn’t a stressful time for everybody. From the research that we’ve done, a lot of our fund managers are experiencing stressful times as well. However, by working so closely together, we can make sure that the investments we use are acting in line with expectations, even under stressful circumstances. Most importantly, we can be positioned for whatever the future brings, even though we don’t know what the future will be.

As I write this from my basement, sitting by myself, staring at a wall of artwork that was created by my daughters over the last two months, I realize that I’m actually more connected to our investment team than I ever have been before.

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This article contains general information that is not suitable for everyone. The information contained herein should not be constructed as personalized investment advice. Reading or utilizing this information does not create an advisory relationship. An advisory relationship can be established only after the following two events have been completed (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement. There is no guarantee that the views and opinions expressed in this article will come to pass.

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