Our Investment Process


What is the source of all profits in investing and the world at large? It’s the hard work and ingenuity of people. We are truly a global society and a global economy. Each year more people contribute to our world through ideas, productivity and consumption. This trend should continue well into the future driving long-term economic growth and opportunity.


At Balanced Rock, we survey local, regional and global opportunities for investible asset classes. We then filter out those with low liquidity and poor accessibility. This makes the cost of investing worthwhile. With the remainders, we analyze historical and potential performances. We also scrutinize how they have typically moved in relation to each other and inflation. Finally after much research, we develop projections which become our long-term market expectations.


Our market expectations are then used as inputs into several portfolio optimization models. We look at various risk/return models rather than just a single mean variance optimization (MVO) process. These include a resampled MVO which accounts for the uncertainty of estimates and inputs. It also models various potential outcomes and identifies portfolios that perform well in a range of scenarios. Another tool we use measures and models Conditional Value at Risk (CVaR). This estimates the size and frequency of an asset class’ largest losses, and helps us find portfolio weights to minimize impact. Additionally, we look at multi-period returns (geometric average). This type of model takes into account the reduction in returns caused by volatility over time. With these optimization models fully developed, we focus on investments.

Investment Analysis

We choose a combination of investments that provides exposure to each asset class shown to perform well in our portfolios. We look for tax efficiency, low transaction costs, and reasonable management fees appropriate to the style and type of the investment. We include a well-diversified group of asset classes that benefit from a regular rebalancing strategy to maintain the proper risk exposure. This strategy dovetails with our clients’ risk tolerance preferences.


How can we improve the risk and return trade-off of the asset classes in which we invest? We include passive and alternative indexing, active management, option strategies, and individual securities. We believe that markets are generally efficient and short-term attempts to beat the market may become unprofitable due to taxes and transaction costs. Also, we believe that factors such as company size and valuation can provide increased low-cost, long-term opportunities. Similarly, we understand that selection of an index can impact the risk and return trade-off. Our strategy is to choose wisely, incorporating proven research to meet our clients’ needs.


We use in-house and third-party research to gain the best perspectives for which funds and indices to select. The most familiar ones do not necessarily make the best investments. On an ongoing basis, the most current research informs our decision making. We also renew our investment process regularly to scrutinize new opportunities. As a small firm, Balanced Rock has the benefit of being extremely nimble. We bring new ideas into our process quickly and easily to meet our clients’ needs and expectations.