Frequently Asked Questions

Value investing means to purchase shares of stock in a company where the current market value is trading at a discount to their intrinsic value (i.e. the valuation the investor believes they should be worth). It should be noted that there are numerous different styles within “Value” investing.  See our Value Points article, “Value is a Big Tent” for more information.

• A “Passive Investment” is one in which the investment managers try to mimic the portfolio construction or return stream of a particular benchmark index, such as the S&P 500 or the Bloomberg Aggregate Index.
• An “Active Investment” is one in which an investment team makes individual decisions on holdings within a portfolio, sometimes with the goal of providing a return higher than a particular benchmark index or sometimes to produce a specific absolute return or level of risk.

A non-exhaustive list of some things that are important to consider may include:

• The tenure over which an investment team has been managing a particular asset class;
• Though you shouldn’t expect the past to be predictive of the future, it is also important to view an investment team’s track record with regard to return performance;
• Since returns shouldn’t be viewed in a vacuum, Risk Management is also a key input;
• The independence of the investment decisions and the decision-makers;
• Asking to see investment performance both gross and net of any fees;

• “Quality” can be viewed via a number of factors, high levels of profitability, low levels of leverage, and low variability of returns can all be seen as contributing to the “Quality” of a particular company or investment.
• The persistence of these factors over time is particularly indicative of a “Quality” investment, and by intuition, those businesses of high quality should be able to continually compound strong returns for their investors.

Active managers in fixed income, specifically Investment Grade Fixed Income (those bonds rated BBB or above by S&P) can seek to make above market returns for investors through a number of different means, many which are broken down by particular risks. Duration (i.e. levels of interest rate risk and the sensitivity to changes in interest rates), Credit (i.e. taking on the risk that a borrower may not be able to meet their obligations), and Structure (i.e. the format of a particular security in the manner in which it pays principal and interest) are some of the levers at the disposal of fixed income investment managers.