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Our investment beliefs, which complement and underpin our endowments, are set out below. These beliefs provide a clear statement about how we believe investment markets work. Our beliefs are a key driver of our investment decisions.

 

INVESTMENT DECISIONS
INVESTMENT BELIEFS
INVESTMENT FACTS

Governance and investment objectives

Clear governance and decision-making structures that promote efficiency and accountability are effective and add value to the Fund.

It is important to be clear about investment objectives for the Fund, risk tolerance, and the timeframe over which results are measured.

Asset allocation

Asset allocation is the key investment decision.

Investors with a long-term horizon can outperform more short-term focused investors over the long-run.

Risk and return are strongly related.

There are varied investment risks that carry premiums / compensations. Illiquidity risk is one such premium.

Investment diversification improves the risk to return (Sharpe) ratio of the Fund.

Asset class strategy and portfolio structure

Asset class expected returns are partly predictable; prices tend to revert to fair value over time. 

Investment markets are competitive and dynamic, with active returns very difficult to find and constantly changing source.

Market volatility tends to cluster over short horizons but mean-reverts over longer horizons.

Investment risks can be unbundled to make the Fund more efficient. This includes the separation of market (beta) and investment-specific investment manager skills (alpha).

Manager and investment selection

The ability to consistently generate excess returns from skill vs an appropriate benchmark (net of fees) is rare; where this ability exists, it is hard to access.

Some markets or strategies have characteristics that are conducive to a manager's ability to generate active return. These characteristics may change over time.

Environmental, social and governance considerations, including climate change, are fundamental to long-term risk and return.

The more efficient a market is, the more difficult it is for a manager to generate active return.

Research signals and methods used by managers tend to commoditise over time through market forces.

In some cases synthetic exposure to a market or factor can provide a guaranteed active return to the Fund, and this represents an additional hurdle that an active manager must surpass.

Execution

 

Managing fees and costs and ensuring efficient implementation can prevent unnecessary cost.

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