Investment Philosophy

Investment Process Overview

The key to any successful investment process is a repeatable, disciplined approach.  The process Algonquin uses for each of its Wealth Management clients includes three critical steps as described below.

1. Investment Objectives — The first step in the Algonquin investment process lays the groundwork for future success.  A candid and thorough series of discussions regarding each client’s investment goals, risk tolerance, time frame and other critical items will provide the Algonquin team a starting point with which to begin drafting an Investment Policy Statement (IPS).  This document will serve as a blueprint for constructing the portfolio as well as a guide for the periodic reviews of its progress once invested.  The IPS reflects the specific circumstances of each client and encompasses key items including the purpose of the portfolio, participant roles, investment philosophy, investment selection process, investment restrictions and other items critical to the portfolio’s success.  Most importantly, it will detail the strategic asset allocation framework that reflects the client’s long term investment goals and risk tolerance.  Thus, the IPS is the foundation for the portfolio construction process.

2. Portfolio Construction — The IPS strategic asset allocation is the starting point for the construction of the portfolio.  Within this framework, Algonquin will likely recommend that the portfolio be tilted from time to time to opportunistically position the portfolio.  Algonquin’s top-down macroeconomic tilts are important differentiators from the more static approach used by many firms.  Another key element of portfolio construction is the identification and selection of the managers and funds responsible for fulfilling each part of the portfolio’s asset allocation.  Managers and funds selected must go through a rigorous review and approval process in order to be made available to Algonquin’s clients.

3. Risk Management — Finally, the ongoing and critical part of the investment process involves three aspects of risk management. 

                (i)    First, the portfolio is reviewed in the context of the IPS.  The portfolio should generally be within the asset allocation guidelines determined by the client and Algonquin.

                (ii)   Second, the performance of the overall portfolio (and for that of each manager/fund selected to fulfill a segment of the overall allocation) is reviewed to determine where value is being added and whether changes are warranted.  Often no changes are necessary, however, there could be times when the portfolio should be re-balanced or managers replaced.

                (iii)   Third, the manager and funds available through Algonquin undergo an ongoing review.  If it is determined that there has been a critical change that jeopardizes a manager’s ability to perform as they had in the past, Algonquin will recommend a replacement that is felt to be better suited to manage that asset class or strategy going forward.

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