We are excited to share with our readers and friends a fantastic interview with Jon Robinson by Financial Advisor magazine featured columnist, Bill Hortz. In it, Jon and Bill discuss managing risk in a post-pandemic world, key questions advisors should be asking of their asset managers, and what represents prudent investing today. Blueprint's philosophy and story are also explored, providing valuable insight into how and why we do what we do. We are immensely grateful for the opportunity to have this discussion with Bill and hope that you enjoy reading it.
Below is a brief excerpt or you can read the full interview by clicking here.
Hortz: Why do you characterize your firm as holding vastly different opinions, doing all the things that the industry would rather you didn’t do, and thereby offering a “refreshing alternative”?
Robinson: For starters, we are one of the few, if not the only systematic asset manager that is also 100% transparent with our rules. We believe that the rules themselves are not the ‘secret sauce.’ Our rules are time tested and statistically sound, but they are not the reason we will be successful. The ‘sizzle’ is in the disciplined execution of those rules, day in and day out. For some (not us), that might sound boring and uneventful. To paraphrase Warren Buffet, we believe that this is our ‘wide and long-lasting moat.’
Besides being systematic and transparent, we are also different in that we diversify across both assets and time. Asset diversification is standard operating procedure due to the mass adoption of Modern Portfolio Theory. Our risk budgeting process ensures that a portion of each asset class held in the portfolio remains passive, with infrequent rebalances. Time diversification is where we depart from standard Modern Portfolio Theory orthodoxy.
We apply two trend following strategies to each of the asset classes in the portfolio in order to gradually and systematically adjust asset allocation weightings, depending on the environment. This is how we diversify across time. Codifying this allows our decision making to be unemotional and disciplined with the objective of sidestepping major asset price declines. Additionally, the individual time frames are distinct to the extent they provide an additional layer of diversification through noncorrelation.
Hortz: What are examples of more prudent processes and actions needed in asset management that your research has led you to?
Robinson: One word: price. We utilize asset prices as the chief input in the decision-making model. The price of an asset is the only variable that directly affects the value of an investors account. There is no fundamental data point that can claim such a strong force. To precisely measure and manage risk, we focus almost exclusively on price to make decisions. Many times, fundamentals simply cannot react or update quickly enough to reflect a change in the environment. Price reflects these changes, in real-time. This line of thinking is not reflected in the current zeitgeist.
Access the full interview by clicking here.
For more thoughts on ways to evolve your investment approach and reduce the impact of human behavior on investment decisions visit www.blueprintip.com