People Perspectives Strategies Community Contact Account Login Investment Philosophy: We Focus on What Matters Salient’s single- and multi-asset alternative and real asset investment strategies serve as powerful building blocks for efficient portfolios. We describe a strategy’s impact on a portfolio with the following characteristics: Adaptive: during times of market volatility, “auto-adaptive” or model-driven strategies dynamically provide some of the best downside protection Income-producing: from pension plans to individuals, investors need income generation in order to meet their investment objectives Diversifying: spreading a strategic allocation across uncorrelated assets can reduce the dollar- and risk-weighted equity exposure that dominates most traditional portfolios When developing strategies, we adhere to our core investment philosophy that broader portfolio diversification decreases risk and increases return. This belief is agnostic to market returns and predictions, and instead centers on five things that matter: How much risk you take matters We think investors and advisors make two mistakes with risk. First, they tend to underestimate both the theoretical amount of risk required to achieve their investment goals as well as the actual amount of risk achieved in their portfolios. Second, even the few who take the right amount of risk may experience unnecessarily wild swings in risk over time because they are targeting dollar exposures instead of risk exposures. Taking enough risk and consistently achieving that risk target is more important than any other decision an investor will make. Which risk you take matters While investors are usually familiar with the value of diversification, their portfolios usually don’t reflect it. By and large, investors are taking equity market risks and not much else. Intentionally choosing a range of strategies with non-correlated risks is the second most important thing investors can do to improve their portfolios. Human behavior matters Every investor either pays or collects a tax on behavior. Good investors are process-driven in their own portfolios, and they collect a tax from other investors by understanding herd and momentum tendencies, biases toward familiarity (for example, favoring US equities over emerging markets), biases toward growth and other factors, and the fact that for long periods, market prices and returns can be determined by the perceptions and game-playing of market participants rather than economic fundamentals. Being a collector of the tax on behavior is critical, and can often pay off most when other sources of return are falling. Costs matter Most investors have begun to understand the impact of fees but often underestimate the importance of trading costs and taxes, which can dwarf explicit fees in particularly inefficient strategies. Good investors have an appreciation for how much of their returns are taken by others as well as an appreciation for the greater importance of the prior three items. Market structure and information matter Most investors drastically overestimate the value to be found in analyzing and selecting individual securities. Active management can matter when: (1) you are measured against passive instruments and market indices that are flawed, (2) you have a clear informational advantage, or (3) you have a structural advantage (e.g. long term horizon, willingness to be illiquid, willingness to take risks others are restricted from taking) that you can exploit. Good investors focus the vast majority of their time and attention on getting the first four issues right and look to benefit from active management on the margin. People Perspectives Strategies Community Contact CRS Forms Twitter LinkedIn Check the background of Salient Capital, L.P. or an investment professional on FINRA’s BrokerCheck. Salient is the trade name for Salient Partners, L.P., which together with its subsidiaries provides asset management and advisory services. Securities offered through Salient Capital, L.P., a registered broker-dealer and Member FINRA, SIPC. Salient Capital, L.P. is a subsidiary of Salient Partners, L.P. The series of funds under Salient MF Trust are distributed by Foreside Fund Services, LLC. The series of funds under the Forward Funds trust (“Salient Funds”) are distributed by Forward Securities, LLC. Forward Management, LLC d/b/a Salient is the investment advisor to the Salient Funds. Not FDIC Insured | No Bank Guarantee | May Lose Value Terms of Use Privacy Policy Business Continuity Plan Social Media Guidelines © 2021 Salient Partners, L.P. All Rights Reserved.