Drystone Total Portfolio Management

Concentrated Investments + Diversified Investments = a Total Portfolio solution.

Drystone difference:
In its research process, portfolio reporting, and fee schedules, Drystone clearly differentiates between the following two approaches to investment management:

Drystone Concentrated Investments:
Drystone conducts continuous, intensive top-down and bottom-up research of a universe of specific individual investment candidates. When, and only when, Drystone perceives an opportunity to add significant value above a benchmark index through careful selection from that universe, we invest in substantial percentages. Example of Concentrated Investments: individual common stocks meeting strict criteria.

Drystone Diversified Investments:
There will be asset classes compelling and appropriate to complete and enhance client portfolios and to outperform a broad benchmark, but where concentrated individual security selection may not offer sufficient additional benefits. Here, the rational choice is diversified, lower-fee index and buy-and-hold investments rather than full-fee individual security selection. Examples of Diversified Investments: individual corporate, municipal or inflation-indexed bonds; exchange-traded funds for emerging markets, commodities, etc.

Drystone applies careful scrutiny and selection to all investments, both Concentrated and Diversified, and combines them into Total Portfolios designed to outperform benchmarks contained in each client’s Statement of Investment Objectives.

Active investment freedom combined with overall diversification can yield a more robust portfolio.

Drystone difference:
Drystone defines a robust portfolio as one that offers real return potential without excessive Total Portfolio risk. Genuine diversification comes not from a multitude of small positions but from a portfolio constructed of truly varied, differentiated assets. The ideal addition to a portfolio brings both solid returns and low correlation with the other assets in the portfolio.

Drystone difference:
Drystone takes risk assessment very seriously throughout all parts of a portfolio but does not apply certain common, but in our view ineffective or counterproductive, constraints within the Concentrated Investments portion of the portfolio:
  • Drystone does not restrict itself to recognizable large-company “blue chip” stocks and may emphasize lesser-known small and medium-size company stocks, which can be more volatile.
  • Drystone may persistently favor certain industries/sectors and avoid others entirely.
  • Drystone assiduously seeks to mitigate/limit the risk of permanent loss of principal everywhere, but within the Concentrated portion of a portfolio we pay little attention to short-term volatility or short-term behavior relative to a benchmark.
Drystone discipline:
Hence the importance of combining Diversified Investments with Concentrated Investments – Drystone wants each client’s Total Portfolio to achieve genuine diversification and risk awareness while letting both Diversified and Concentrated Investments pursue durable added value free of distractions.

Each client’s Statement of Investment Objectives sets minimums and maximums for the percentage of a portfolio to be held in Concentrated Investments and in Diversified Investments. As another self-policing step, the performance of the Concentrated Investment portion must meet or exceed its own benchmark to preserve its target percentage in portfolios.

The goal is a strong Total Portfolio and investor staying power.

Drystone difference:
Drystone believes that its Total Portfolio Management can generate the greater investor staying power essential to long-term investment success. A Drystone Total Portfolio seeks to:
  • Fulfill each client’s entire set of objectives via a single coherent mix of assets.
  • Avoid needless complexity or illiquidity or tax intricacies.
  • Focus proactive attention on the best investment opportunities.
  • Employ the relative merits of both active and index investing.
  • Outperform its benchmarks over a rolling multi-year horizon.

Drystone LLC investment portfolio manager