Our all-weather strategy is designed to produce
above average risk adjusted returns through
a full market cycle.
We call it all-weather because no matter what sort of market we're
in,
we actively manage the strategy to capitalize
on attractive opportunities while also trying
to shield our clients from volatility.
So while all-weather looks to produce solid returns
and steady current income,
its main emphasis is capital preservation.
Warren Buffett famously said that
the number one rule for investing is
don't lose money.
And rule number two is
don't forget rule number one.
We take this idea to heart through our all-weather strategy.
We manage the strategy to minimize the possibility of
clients suffering a permanent impairment of their capital.
One of the things that makes the strategy special
is our low correlation approach.
Our clients in the all-weather strategy are typically
looking for a shelter from stock market volatility.
We achieve that by investing with the
lower correlation to the broader market.
Correlation measures how assets move in relation to each other.
If your investments have high correlation to the stock market,
they will basically move in lockstep with each other.
In other words,
you are on the stock market roller coaster ride.
We aim to invest in the stock market.
We aim to reduce portfolio risk by looking for
opportunities across several low correlation asset classes.
One of our favorites is merger arbitrage.
This is a strategy in which we're investing in the stock
of a company that has announced it will be acquired.
Given that there is always risk that an
acquisition will not happen as announced,
the stock of the target company usually trades at a discount
to the acquisition price.
This difference is called the spread.
This spread often provides SAM with the opportunity
to generate an attractive return over time as
the acquisition gets closer to being completed.
Importantly,
what we love about merger arbitrage is that the return
you earn has little to do with what the stock market
happens to be doing in any given month or quarter.
It's based on how soon and how likely the acquisition is to close.
By adding this low correlation investment to the market,
we are able to do with all weather,
we are able to lower the risk of our overall portfolio
and offer some protection to our investors from some of the
pain experienced when other stocks in the market drop.
We've seen the virtues of this low correlation
approach during the last two bear markets.
The first was in March 2020,
when the market plunged in the early days of
COVID. The reality is that the vast majority of
investments suffered greatly during that period.
For example,
the S&P 500 index declined more than 33
% from its high during that market crash.
During the same period,
all weather investors experienced a
decline of less than 14% on average.
We were also able to shift gears and buy a lot of
wonderful companies after the market had dropped.
Per fact set,
the strategy ended the year outperforming the S&P
500 despite all weather being a much lower risk.
lower risk approach.
Just a few years later,
we had another bear market.
All weather again proved to be a resilient strategy.
Yes, it was down.
But once again,
per fact set,
it only declined a fraction of what the broader market experienced.
Those were very different bear markets and all weather
meaningfully outperformed the broader indexes in each.
That's all weather growing and up markets
offering some measure of protection.
and down markets.
If you're looking for an investment approach with less volatility,
want your money to grow and have the appropriate
risk tolerance and investment objectives,
the all weather strategy could be right for you.
