Active managers apply disciplined analysis to find underlying value in individual companies, sectors or markets that is as yet unrecognized by other investors. Their goal is to outperform the market, and when their strategies, research and analysis are solid and insightful, they do. As active managers we see ourselves as owners of the companies we choose to invest in. As partners in the enterprise, we are continually engaged in monitoring the performance of the companies we own and in communicating with their managements. We also attempt to lower portfolio risk by investing in what we believe to be higher quality companies and encouraging diversification.
Passive managers view stocks as commodities.
Passive managers argue that it is impossible to outperform the market, so one might as well just own the market. We acknowledge that not all active managers outperform the market and that asset allocation, as well as the selection of individual securities, plays an important role in portfolio performance. However, by employing a thorough and disciplined investment process in our search for value, anchored by our unique investment themes, we have been able to identify good businesses and to add substantial value for our clients. Since we believe that stocks represent ownership of individual businesses that vary dramatically in quality and are not interchangeable commodities, we place a great deal of emphasis on identifying the businesses to own. As investors in good businesses, our clients should benefit from having their equity capital grow.