Investment Philosophy

THE PRIMACY OF RISK CONTROL

Our objective is higher performance with less than proportionate risk, not superior investment performance. Superior performance under difficult circumstances is required to demonstrate that a manager's above-average returns during good times were gained via skill rather than merely taking on above-average risk. Therefore, we give averting losses the top priority rather than only looking for potential rewards. Our guiding principle is that "if we avoid the losers, the winners will take care of themselves," particularly in the opportunistic markets where we operate.

EMPHASIS ON CONSISTENCY

We don't accept outcomes that fluctuate between the top quartile in strong years and the bottom quartile in bad years. Our opinion is that a strong batting average, as opposed to a combination of dazzling successes and miserable failures, is the strongest foundation for a winning record.

THE IMPORTANCE OF MARKET INEFFICIENCY

We believe that effort and skill might result in a "knowledge advantage," and hence, possibly better investing outcomes. But in supposedly efficient markets, where many participants have about equal access to information and behave impartially to factor that knowledge into asset values, we do not think this is possible. Only in less efficient markets do we invest because, in our opinion, a dispassionate application of talent and effort should benefit our clients.

THE BENEFITS OF SPECIALIZATION

The only way to get the outcomes we and our clients want is through specialization. Therefore, we demand that each of our portfolios practice a particular investment speciality and do it as well as it possibly can. We set up the charter for each investing speciality in as much detail as is practical and do not stray from it. This eliminates surprises because our behavior and performance always correspond to the task we were paid to complete. Customers of WRF interested in a single asset class can receive exactly what they want thanks to the availability of specialized portfolios, and customers interested in multiple asset classes can combine our portfolios to get the desired combination.

MACRO-FORECASTING NOT CRITICAL TO INVESTING

The fastest way to the outcomes we and our clients are looking for is through specialization. As a result, we demand that each of our portfolios focus solely on one type of investing and do it to the highest standard possible. We set each investing specialty's charter as plainly as we can and do not stray from it. In this way, there are never unpleasant shocks because our behavior and performance always correspond to the work that we are employed to do. Because WRF offers customized portfolios, clients interested in just one asset class can receive exactly what they want, and clients interested in many asset classes can combine our portfolios to create the composition they want.

DISAVOWAL OF MARKET TIMING

We maintain portfolios fully invested anytime attractively priced assets are available to purchase because we do not feel that we have the predictive power necessary to appropriately time markets. We may shift toward more defensive assets, become more selective, or act more deliberately in response to market uncertainty, but we never make an effort to raise money. We are employed by clients to invest in particular market areas, and we must never let them down. Holding investments that are losing value is uncomfortable, but losing money because we didn't purchase the assets we were paid to purchase is unacceptable.