Investment Approach


Lodestar’s aim is to understand, measure and weigh the consequences of investment risk. This allows to focus on the investment elements that generates long-term returns and avoid those that don’t. Our approach provides clients with exposure to investment risk premiums, risk management that isn’t a performance drag and disciplined portfolio management.

Investment Philosophy

Risk premiums are the primary source of long-term real returns. A well-diversified, systematically managed portfolio provides investors with consistent exposure to risk premiums by avoiding the pernicious effects of unintended risks and costs. Unintended risks erode long-term performance and add unnecessary volatility. A systematic approach ensures that investors always have the market exposure that they expect.

Risk premiums

Risk premiums are the long-term reward that investors receive for exposure to short-term market uncertainty. Consistent exposure to risk premiums has been the safest path to long-term investment growth. Investors often pay insufficient attention to risk premiums despite the fact that it is easy to access, scalable and inexpensive. Risk premiums are however easily eroded by unintended risks and unnecessary costs. Our aim is to maximise exposure to risk premiums in a risk and cost controlled manner.


Diversification spreads investment risk across the portfolio and limits the potential losses from any single security. Market indices that have large concentrations in a small number of securities are by definition poorly diversified. Poor diversification results in unintended and unrewarded risks which are likely to detract from long-term performance. Lodestar avoids these risks by using a proprietary statistical model to construct diversified portfolios.

Systematic approach

Most market returns come from a small number of very profitable periods which are impossible to predict. Instead of trying to forecast these, a simpler approach is to be fully invested and exposed to the market at all times while mitigating against unnecessary risks. Our systematic approach is not subject to emotions and ensures that investors are always fully exposed to the market.


Knowledge should be used to find the simplest way to achieve investment objectives and not used to add complexity that obfuscates more than it helps. Simplicity wherever possible, complexity only where necessary.