How We Construct Our Portfolios graphic shows the spectrum of BBH Policy Portfolios, including Stable Value, Balanced, Balanced Growth and Growth. It covers where these fall in terms of Return Objectives, Income Objectives, Liquidity, Likelihood of Volatility/Drawdowns and Definition of Risk. On one end of the spectrum is the Stable Value portfolio, which has a narrower range of outcomes. Its return objective is preservation of purchasing power and capital, its income objective is higher, its liquidity is higher, its likelihood of price volatility/drawdowns is lower, and its definition of risk is permanent capital impairment and failure to meet spending needs. On the other end of the spectrum is the Growth portfolio, which has a wider range of outcomes. Its return objective is preservation of purchasing power and growth of wealth over time above inflation, its income objective is lower, its liquidity is lower, its likelihood or price volatility/drawdowns is higher and its definition of risk is permanent capital impairment and failure to beat inflation.
Investment Objective and Philosophy
BBH’s investment objective is to preserve and grow our clients’ capital in the long run. We do this by adhering to a consistent investment philosophy.
Core Tenets of Investment Philosophy
| Active Management, Concentration; Bottom-Up Fundamental Research | Unique View of Risk |
Intrinsic Value/Margin of Safety Framework |
Disciplined, Patient, Long-Term Ownership Perspective |
|---|---|---|---|
| Conduct rigorous fundamental analysis to project potential investment’s value | Believe biggest threat to financial health is capital impairment and inflation, not volatility | Seek strategies that invest in securities trading below their intrinsic value1 estimate | Believe waiting for an investment to realize value is the surest path to exceptional long-term returns |
| Partner with managers who have concentrated portfolios in which they know what they own and why | View market volatility as opportunity to buy high-quality assets at a discount to valuation | Insist on providing a margin of safety2 | Hold cash when there are no attractive opportunities; sell when investments no longer offer acceptable returns relative to loss potential |
1Intrinsic value represents what we believe to be the value of a security based on our analysis of both tangible and intangible factors.
2A margin of safety exists when we believe there is a significant discount to intrinsic value at the time of purchase.
How We Construct Our Policy Portfolios
In BBH’s wealth management practice, policy portfolios are constructed across a spectrum. We work with clients to create a customized asset allocation that reflects their return expectations, ability and willingness to endure drawdowns and liquidity needs.
This communication is for informational purposes only. The information herein has not been based on a consideration of any individual investor’s circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. Individuals should consult their personal tax, accounting and legal advisers regarding any potential investment or strategy. Any views and opinions are subject to change at any time.
This material does not constitute an offer or solicitation in any jurisdiction where or to any person to whom it would be unauthorized to do so.
NOT FDIC INSURED ● NO BANK GUARANTEE ● MAY LOSE VALUE
