Focused Portfolios

Investors can enjoy the benefits of diversification but can also pay an unnecessarily high cost for it. An appropriate amount of diversification is always crucial, as one should never put all of their eggs in one basket. However,  it is Lionridge’s view that most equity funds are over diversified, holding up to 100 stocks or more in a single country mandate. The contributions of the outstanding investments in such a portfolio are diluted by the presence of companies which can be mediocre, badly managed or overpriced.

In Lionridge’s view, the best way to build significant wealth over the long term is to concentrate on a small number of strong investments. The number of stocks held in Lionridge's global equity portfolio model is limited to approximately 25 to 35. The level of short-term volatility in a portfolio of this size is not materially greater than that for a portfolio holding 100 stocks or more, and longer term risk is further mitigated in that the manager of the portfolio can know the companies to a level of detail that a manager holding a much larger number of stocks can not.