Sto­ic’s vision in Trust­ed Magazine.

Click this link: 191108 Trusted Magazine PDF to open a digital version of Trusted Magazine: . The article about Stoic starts on page 10. Or read the full article below:

Stoic: the new asset manager that doesn’t do asset management.

The Netherlands recently gained a new asset manager: Stoic (pronounced: Sto-wik). It is essentially the new name for Blu Asset Management, the Golden Bull-winning asset management firm of Freddy Forger and Henk Kras. At Blu, since 2012 the gentlemen have refined their unconventional way of asset management, which they now want to roll out further under the name ‘Stoic’. They themselves say they no longer do asset management, but ‘Calm Capital Control’. What exactly that means and what the ambitions are with Stoic, we asked Freddy Forger and Henk Kras, both partners in the company.

What exactly does ‘Calm Capital Control’ mean? And to what extent is this something different from traditional asset management?

Freddy Forger: “Every asset manager has his own investment philosophy. Some ‘believe’ in certain stocks. Other managers think they can beat the market through the right timing: they all have a convincing rationale, but in fact they’re all trying to predict the financial markets. That’s actually quite strange. The financial industry, which presents itself as very rational and prudent, is apparently entirely based on these kinds of predictions: as if they’re using a crystal ball! That’s why we developed a completely different investment philosophy, which, instead of vague predictions, takes only knowable facts as its starting point.”

Henk Kras: “We always say: money is emotion, but not with us. We manage our clients’ assets as calmly and rationally as possible. Of course we understand that emotions do play a role: the financial markets are even driven by them. But at Stoic we don’t let ourselves be distracted by that. We keep our gaze very stoically fixed on the dot on the horizon: our client’s investment goal. In fact, we don’t do that much. We don’t ‘invest’ our clients’ assets: we don’t constantly jump in and out of stocks, but we park them in the safest way possible, making sure they simply grow along with inflation and the world economy. We then only check whether the assets are doing well.”

Freddy Forger: “In our view, this is no longer ‘asset management’. Those words suggest all sorts of activity: constantly jumping in and out and continually deciding what to do next. We call our way of asset management ‘Calm Capital Control’. In other words: asset management without fuss. That’s better for our clients’ peace of mind, but it’s also better for their assets.”

What exactly do you mean by ‘controlling’ instead of managing assets?

Henk Kras: “Our clients’ assets are invested as much as possible in the entire world economy. Individual markets can fluctuate unpredictably, but in the longer term the world economy always grows; that’s a fact and also the ultimate form of risk diversification. Once the assets are ‘invested in the world’, we do very little. Our clients’ assets grow calmly in step with inflation and the world economy. We just have to make sure that the proportions between stocks and bonds remain in line with the client’s portfolio. Suppose a client has a portfolio with 30% stocks and 70% low-risk bonds. If the stock market does super well for a period, then suddenly stocks may make up 40% of the portfolio. That must then be corrected and we keep a constant eye on that.”

Freddy Forger: “Moreover, we check each quarter whether the client’s assets are on course toward the ultimate investment goal: the final amount the client wants to end up with. With other asset managers people sooner or later hear: ‘The result is a bit disappointing now, but we expect the market to recover within a year, so it will be fine.’ We spare our clients this form of fortune-telling, because who knows, next year may be disappointing again. With the result that at the end of the road one is disappointed because the investment goal has not been achieved.

“Because at Stoic we take only the knowable facts in the here and now as our starting point, our clients never face disappointments. Our clients are told in a falling market: these are the current interest rates and prices. With that you will not achieve your investment goal. Maybe not so nice to hear, but it prevents much greater disappointments at the end of the road. And moreover, based on this factually correct information we can make much better decisions: do we accept this, or do we add funds to still achieve the goal?”

Add funds in a falling market?

Freddy Forger: “Certainly. It is a fact that in a falling market prices are low. So it’s logical to ‘buy’ in a falling market. Or as top investor Warren Buffet says: ‘Buy when there is blood in the streets’. Strangely enough, most investors buy in a rising market. That’s due to emotion: the high expectations that hang in the air during a rising market ensure that everyone wants to take a slice. In a falling market many investors step out, because no one is cheered up by loss. Asset manager Alex even claimed in a TV commercial: ‘we step out for a moment when things go against us’. That is exactly what you should not do. In fact, you should do nothing at all in a falling market, or possibly buy more, if you can. Anyway, these are exactly the emotions we want to protect our clients against, because ultimately this is not good for returns: that is proven time and again by all kinds of research. We base ourselves only on the facts and exclude emotions as much as possible. Except for the emotion I still feel when I think of that bizarre Alex commercial; I just can’t shake it.”

Why did you create a new brand name ‘Stoic’?

Freddy Forger: “First, we wanted a brand that truly reflects what we stand for. ‘Stoic’ is English for ‘stoïcijns’, which means ‘imperturbable’ and ‘not guided by emotions’. That’s exactly how we deal with our clients’ assets.

“We developed that brand because it’s of great importance to be able to convince people ‘at a distance’. What I mean by that: if we’re sitting one-on-one at the table with a client, we can usually do a fine job convincing them of our investment philosophy. We don’t need a brand name and marketing for that. But we want to grow, maybe throughout Europe. Technology makes that possible: clients can easily sign up online nowadays, for example. That means that soon we can’t possibly sit down with every client individually. So that client must be convinced in another way, ‘at a distance’ – building a real brand is essential for that.”

A new brand, marketing; that brings a lot of costs. Those are ultimately paid by your clients?

Henk Kras: “I don’t think there’s an asset manager to be found who is as good at keeping costs low as we are. As mentioned earlier: we rely only on facts. Returns are unpredictable, but costs are a fact: high costs can even make a nice return go up in smoke! That’s why we’re constantly looking for ways to keep costs as low as possible. No fancy client events or expensive bottles of wine at Christmas with us. And if we discover an index tracker that’s cheaper, we switch to it immediately.

“In this context, creating economies of scale is another way to reduce costs per client: the more clients we serve, the lower the costs per client become for things like transaction costs, the costs for the custodian we use, et cetera. Brand and marketing is therefore our investment that will ultimately ensure that costs per client actually go down.”

Your investment philosophy states that ‘doing nothing’ yields the best return. That sounds so simple, I could do it myself?

Freddy Forger: “Certainly. If you understand a bit how index trackers work, you could do it yourself. Except for two rather essential points: thanks to scale we can achieve much lower costs, leaving more return. But more importantly: an individual can hardly protect themselves against their own emotions. That’s why there is now fortunately Stoic. Asset management without fuss.”