Our Investment beliefs

There are five Investment Beliefs which highlight how we intend to enhance returns.

Investment Belief One – Valuation is an important driver of investment performance over the medium to long-term.

  • The price at which an asset is purchased has a significant impact on its return.
  • Markets are not perfectly priced and therefore investing when assets seem to be attractively valued can lead to superior investment performance.
  • We recognise that valuation is rarely the dominant return driver in the short-term and therefore we review strategic asset allocation annually with a medium-term view. However, it is important to identify significant dislocations in markets between strategic reviews.         

Investment Belief Two – Risk is multi-faceted and not fully quantifiable, but must be managed.

  • Risk management is not an exact science. We combine informed judgement with quantitative analysis.
  • Risks must be embraced in order to generate returns. We seek to increase risk when appropriately compensated and to mitigate unrewarded risk as part of a counter-cyclical investment style.
  • It is important to plan for 'bad times'. By managing risk effectively before and during challenging conditions our long-term perspective can be utilised to our advantage.
  • In addition to market risk we monitor and manage other risks such as liquidity, counterparty, credit and legal risk.  
Investment Belief Three – Diversifying portfolios improves investment efficiency.
  • Asset classes contain a variety of risk premia and it is important to decompose them accordingly and identify associated return drivers. Diversification across different risk premia can lower overall risk without reducing expected returns.
  • Financial leverage is a useful tool when markets offer compelling diversification opportunities.
  • Analysis of risk and return contributions are important for sizing exposures and building portfolios that deliver the most suitable risk-return trade off.
  • In investment the risk of complexity is high and should be limited within an investment process. Investment strategies should only be implemented if they are fully understood and have the potential to improve meaningfully either investment efficiency or risk-adjusted returns.
Investment Belief Four – Environmental, social and governance factors materially impact long-term investment returns and must be taken into account.
  • Integration of environmental, social and governance factors improves investment decisions in the long-term.
  • Active ownership empowers investors to influence corporate behaviour and benefit from sustainable business practices.
  • Long-term themes expose our portfolios to substantial risks and opportunities which cannot be fully quantified but should be managed. 
Investment Belief Five – Costs can significantly reduce returns and therefore must be accounted for in all investment decisions.  
  • Hidden costs of investment go significantly beyond quoted headline fees. We disaggregate costs and take all into account when assessing expected returns.
  • We apply strict standards to fee structures in terms of transparency and quantum. We use our leadership role in this field to drive positive change in the industry.
  • We will use internal resources where it makes sense from either a cost or control perspective. We recognise it is often necessary or more cost efficient to utilise external expertise.

To find out more about our investment beliefs, visit the RPMI Railpen website.