How We Invest
Life is full of ups and downs, investing doesn’t have to be.
We believe the best way to manage your wealth is by applying the same investment approach widely used by institutional investors such as pension funds, university endowments and family offices. Why reinvent the wheel if the largest and most sophisticated investors in the world have figured out how to maximize returns while minimizing risk?
Our institutional investment strategy provides clients with broad portfolio diversification by investing in both private and publicly traded assets.
Private Assets
For decades, institutional investors have allocated significant capital to private assets including private debt, private equity, venture capital, real estate, infrastructure, and other ‘non-correlated’ strategies. By diversifying their portfolios into these areas, institutional investors have been able to reduce the volatility that comes with investing exclusively in public stock and bond markets.
For example, at the end of 2021 fiscal year, the Canada Pension Plan (CPP) managed $500 billion on behalf of Canadians; approximately 50% of CPP’s portfolio was invested in alternative private assets with the balance allocated to publicly traded stocks and bonds.
Traditionally, institutional-quality private asset strategies have been difficult for individual investors to access:
- They typically require minimum investment amounts of at least $2 million to $5 million
- are relatively illiquid (meaning they cannot quickly be converted
to cash) - often require that investors maintain significant personal cash reserves to meet contractual requirements of investing over multi-year periods
- are not usually eligible to be held in registered accounts like RRSPs
- require a high degree of investment and tax expertise to evaluate, often at significant expense.
By pooling our client capital together and working in partnership with top tier asset managers, Bridgeport can manage a wide range of private asset funds, all of which provide our clients access to a diversified, global portfolio of institutional-quality private assets. Our private asset funds remove the hurdles that had previously prevented individuals from obtaining the benefits of true portfolio diversification.
More information on our private asset pooled funds can be found here.
Publicly Traded Assets
Bridgeport employs an intensive research-based approach to investing in publicly traded stocks and bonds. We focus on acquiring a deep understanding of the individual companies in which we seek to invest. Our portfolios hold a focused number of stocks and bonds, ensuring only our best ideas are included, while still providing ample diversification.
Bridgeport’s investment selection for stocks and bonds is based on investing in businesses with favourable economic characteristics at attractive prices. We avoid businesses which operate in industries with challenging dynamics and poor prospects.
Profitability and Cash Flow
Profitability and Cash Flow
We’re focused on companies that have healthy profit margins, which they are able to consistently convert into cash. We also think it is important to invest in companies with high rates of return on invested capital as this is indicative of a profitable business model. Companies that struggle to earn a rate of return on invested capital in excess of their cost of capital are usually unsuccessful over the long term.
Long-term Stability
Long-term Stability
We favour “steady eddy” businesses that aren’t exposed to material structural shifts within their operating environment. This often means investing in businesses with barriers to entry, strong recurring revenue and “sticky” customer relationships. We avoid industries where the pace of change is so rapid that it is difficult to predict what primary products a company will be selling in a few years’ time.
Managerial Competence
Managerial Competence
We regularly interact with company executives to determine investment suitability. Digging through financial disclosures is not enough for us. Speaking directly to management provides a layer of insight that helps us round out our investment thesis. We look for managers who have demonstrated competence with regard to track record, capital allocation and ESG (environmental, social and governance).
Valuation
Valuation
We assess the value of a business based on our estimate of future profits and cash flow. We search tirelessly for well-run businesses that are undervalued—by this we mean their current share price is less than our estimate of a company’s intrinsic value. This isn’t an easy task, but we find that opportunities present themselves when we develop a deep understanding of attractive companies and follow them closely.