Active Risk Management

Volatility is not risk. Volatility is opportunity in the Sand Hill investment process.

The assessment of risk is an integral part of our process. Our approach is both strategic and tactical: it acknowledges our real-time market environment, and it requires flexibility and proactive risk management techniques. The following steps in our disciplined approach highlight our belief that investing is a series of principles focused on risk before return:

Mandate to Rebalance

Our approach is predicated on rebalancing against market extremes and consensus opinion. This distinctive and important self-imposed mandate inherently takes advantage of the inevitable periods of excessive optimism and pessimism. It forces us to act on our risk management conviction and discipline of buying low and selling high. We regularly rebalance portfolios based on relative performance, valuation, and opportunity.

The Sand Hill Investment Dashboard

We constantly monitor the various risks that affect all portfolios — from daily price movements to inflation and longevity risk — using our proprietary investment dashboard analysis. We believe that it is equally important to understand the long-term risks inherent in the capital markets, and the near-term risks embedded in any portfolio.

Contrarian, Long-Term Approach

Throughout our decades of experience, we have harnessed the compelling opportunities that are too often created by overly-excited consensus opinion. And yet, our instinctive and healthy skepticism obliges us to repeatedly test consensus conclusions against our own. To excel in today’s market environment, we believe in forming well-grounded perspectives based on long-term market outlooks of at least three years, while taking advantage of valuation disparities as they occur.

Strategic and Tactical Approach to Portfolio Management

Although maintaining a commitment to long-term goals is important, we do not subscribe to the “set and forget” asset allocation mentality subscribed to by many in our industry today. Our approach allows us to remain focused on our long‐term strategic outlook, and at the same time optimize intermediate term tactical opportunities through active risk assessment.

Comprehensive Reporting Capabilities are Essential

In addition to our regular quarterly reporting, clients have the same access to performance, attribution, and transactional information that we do. Additionally, we have the ability to report on our clients’ larger financial picture—including assets that might be managed personally or by other outside managers. We believe that closely monitoring investment performance and attribution provides the needed insight to execute and improve our clients’ understanding of our strategy.

Significant Portfolio Risk Controls

As fundamental investors, we emphasize two things:

  • The importance of focusing on the sustainability and visibility of our outlook, and
  • The effect that our exposure to our underlying managers and individual securities has on all portfolios.

Beyond an extensive review of the fundamentals, we also implement concentration restrictions, variability restrictions, tax optimization overlays, and downside analysis through portfolio stress testing. We actively monitor our clients’ aggregate risk exposures.

Team Process

Our team-based approach inspires deep analysis and intense debate. This intellectual honesty among experienced staff serves to mitigate errors and optimize the decision-making process. In addition, consistent oversight by our Investment Committee and tight coordination with Wealth Managers assures that each client’s specific objectives are met.

Sell Discipline

Separate from normal portfolio rebalancing, one of the most difficult decisions in the investment process involves when to sell a security outright. The sell decision can arise for any number of reasons, including the:

  • Achievement of valuation targets,
  • Success or failure of certain milestones, and
  • Consideration of specific client tax consequences.

We are committed to the belief that a strong sell discipline is critically important to long-term investment success.

Operational Integrity

For more than three decades, Sand Hill Global Advisors has committed itself to building resources ahead of demand. As a result, we have significant infrastructure, including an in-house Chief Compliance Officer and Controller, and full administrative support, complemented by external custodians and auditors. As owners and fiduciaries, we have a vested interest in the success of our firm—and the success of all of our clients. Our reputation is our business.