Bringing institutional expertise to individual investors

At Redwood, we apply the same basic principles in our clients' portfolios as the ones used by multi-billion dollar pension plans, foundations, and endowments. We utilize Modern Portfolio Theory (MPT), a Nobel Prize winning investment strategy dedicated to building diversified portfolios that reduce risk and maximize return. We do not believe in chasing after hot stocks and market sectors, nor do we try to time the market. Instead, we conduct thorough analyses on how to best combine a variety of asset classes to build portfolios that minimize risk and maximize return. This is the strategy employed by many institutional level investors because it has proven extremely effective over long periods of time. Our objective is to bring this disciplined and highly successful institutional approach to individual investors.

Our investment philosophy focuses on four important areas when building a portfolio:

Asset Allocation
The asset allocation decision is the most critical decision of investment management. It has a much greater impact on the future returns than the relative performances of the individual investment managers or investment strategies.

Diversification
Assets in the client's portfolio will be diversified across an array of asset classes, investment strategies, and capital markets. The vast majority of the world's capital markets are available to the client for investment. By diversifying across an array of asset classes, we expect to achieve higher returns for any corresponding level of individual market or asset class risk.

Expected Risk, Returns, Correlations
The performance of capital markets over time has been highly variable and this will likely continue. By estimating returns and relationships of the various asset classes, it is possible to derive an estimate of the distribution of potential outcomes that can reasonably be expected from various combinations of investments.

Rebalancing
To maintain consistent risk/return parameters, periodic rebalancing is necessary. Rebalancing can enable a portfolio to capture increased returns (buying low and selling high) while reducing exposure to excess risk.