Enriching Lives, Realizing Visions

Investment Approach

Our Approach and Philosophy

At Diversified Trust, we are dedicated to building and managing portfolios with a goal-oriented approach to their exposures, risks, costs and expectations.

That means understanding the financial world as it is priced right now. It means having a dedicated in-house team of seasoned investment professionals who spend each day with on-going research, due diligence, manager selection and portfolio construction. Finally, it is the ability to use our almost $7 billion of assets under management to gain access to managers and solutions from every corner of the investment marketplace at the lowest costs possible.

  • Your Goals

    We strive to clearly understand what "success" means to you. Your goals set the objectives for the monies you entrust to us, whether they are a sustained spending rate or to never fall below a targeted valuation.

  • Your Idea of Risk

    There are different kinds of Investment risks and knowing how each would relate to your goals for the portfolio allows us to build a set of exposures with the highest probability of making your goals your reality.

  • Your Portfolio

    Building the portfolio to make all of this happen requires selecting investment instruments (whether active or passive, liquid or illiquid) and combining them into a whole that will perform in both strong and weak economic environments.

We think differently from other firms by not starting with asset classes first.

Asset classes and investment solutions are messy things, often packaged to sell rather than help build a specific portfolio.

Starting with the risks themselves, and how they are priced, allows us to better build from the bottom up.

Risks Define the Returns and the Returns Define the Portfolio

The path to success is dependent on investment markets and those change over time.

Building a successful portfolio is much like sailing…

We can identify our objective, such as a day sail out to Catalina and back. But the path we take today could be very different from the one we might have taken last week, as the wind, waves and other boats all could impact today’s best course. A good investor bases his or her decisions on what the market can give us today, just as a good sailor understands the current weather.

Markets pay investors a premium, or return, for taking on uncertainty. Getting the portfolio right starts with:

  • Understanding the premiums that are being paid today;
  • Sizing your exposures to those premiums consciously and exactly; and
  • Aligning them with their ability to reach your specific investment goals.
Investment Approach
Managing Volatility in a Portfolio

Finding and Building Solutions Takes Experience and Knowledge

A great portfolio requires great managers. This means ones with solid reasoning for their approach, with evidence of success, and attractive fees. To hire great managers, we need great people who have done that for years, following an approach that we can show leads to success over relevant, rolling time horizons. We have both.

A Good Reason for Performance

We have to understand a manager’s rationale for investing. They have to show us that their process can consistently deliver results over time.

Results aren’t everything, but they are something

Comparing performance versus a benchmark generally does not separate the talented ones from the lucky ones. A well-founded approach consistently executed should show up in the results. If it doesn’t, that tells us something, too.

Fees Matter

In the end, it is the results that matter. And while returns can vary through time, fees are a constant. We pay a great deal of attention to the fees we negotiate on our clients’ behalf.

To read past investment reports, click here.

Client Q&A

Why does Diversified Trust have an internal Municipal Bond Team?

Since our founding, Diversified Trust has held the belief that the best way for our clients to invest in municipal bonds is for us as a fiduciary to execute purchases on their behalf.  We do this because of price, because of credit and because of you.

  • Bond markets have historically had a two-tier structure: buying bonds in small lots has tended to cost significantly more than buying bonds institutionally in large lots.  By aggregating the purchases we make on behalf of our clients, we are able to negotiate a much lower cost which leads to a much better yield.
  • The key to good bond investing is understanding the risk associated with the borrower’s ability to both make interest payments and return the investor’s principal.  Credit analysis is a very detailed task and it rewards the careful and the diligent.  We have more than two decades of hands-on experience adding value to our investors by doing the hard work of understanding the credit risk of every bond we buy.
  • Every investor is different, and so are their taxes.  Your state of domicile, federal tax rate and the supply of bonds all impact the approach we need to take to provide the best after-tax return for this part of your portfolio.  Buying off-the-rack municipal bonds does not guarantee the best results.
Why does Diversified Trust have a Private Equity Offering?

Private market investing layers a number of complexities upon the already difficult job of gaining exposure to the equity risk embodied in individual company ownership. We have been convinced that helping our clients navigate the space with a multi-manager approach diversified by type and vintage years is the very best way to gain access, following an approach we utilize throughout our platform. Private markets tend to have less information available to investors, with longer investment horizons and more complex structures to allow investors to influence management and provide guidance. All of this requires special expertise and professionals dedication to the space.

Managers tend to focus on a single aspect of the markets, such as buyout or venture, and might make only a dozen or two investments. Diversifying among a number of managers, markets and companies significantly improves the risk of illiquid investing. Manager selection is critical, since gaining access to the top performers significantly improves an investor’s experience.

Lastly, the illiquid space is notorious for its high fee structure. Our ability to negotiate fees with long-relationship managers and to control our own costs all benefits you.

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Explore a Case Study

“Diversified Trust helped me create a solid transition plan for my business. They coordinated with my lawyers, my CPA, and most importantly, the members of my family.”

Family Business Owner

Risk is More Complex Than Just Uncertainty

Risk is easy to say but much harder to define…

An investor is often asked to express their risk tolerance. That is hard. Because risk has a wide number of permutations. Your individual definition of risk, combined with your set of goals makes the process of building the right portfolio a bespoke effort each time we undertake it. And it should.

Spending Over Time

Managing volatility risk is very important when spending is our chief goal. The more varied the returns, the less our portfolio can spend. Our success in delivering a consistent spend is directly impacted by how much the portfolio’s returns vary over time.

Trailing a Benchmark

The risk of differing from the benchmark for the portfolio is called tracking error and the more the portfolio is unlike the benchmark in terms of exposures, the bigger the chance to experience a return that is vastly different, either positive or negative. The more comfortable an investor is with their benchmark, the closer they may want the portfolio to follow it.

Experiencing a Loss

For many investors, the real definition of risk is the losing of some significant part of their portfolio’s value. We call this draw down. The safer the assets in a portfolio, the smaller the potential draw down but also the lower the overall return and less spending a portfolio can do. Understanding the trade-off can help manage the impact of a loss on your long-term goals.

Selected Resources