Focusing on Risk Adjusted Returns


Steve Romick warns investors not to get lost in recent returns. In an invited editorial in the 2015 Journal of Portfolio Management, he reminds us of “The Importance of Full Market-Cycle Returns.” It’s more than just the last quarter or year, but the full market cycle that matters.

Romick is the managing partner of First Pacific Advisors (FPA), which has $26 billion in equity, fixed income, and alternative strategies. He is also the manager of the $11 billion FPA Crescent Fund since its 1993 inception.

He came to public attention when Morningstar named him U.S. Allocation Fund Manager of the Year (2013). His risk-adjusted returns topped all managers till running their funds since inception. My own confirmation bias deserves blame for this, but I did notice his purchases of equities in March 2020 as the pandemic was causing the market to crash.

Romick is unconstrained, and invests across the capital structure — stocks, distressed debt, and private equity are all fair game. He suggests you must always measure the risks you are going to assume relative to potential returns. Being able to manage around volatility was a key part of both his approach and the superior risk-adjusted performance he has shown over the years.

A list of his favorite books is here; A transcript of our conversation is available here.

You can stream and download our full conversation, including the podcast extras on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Christine Hurtsellers, CEO of Voya Investment Management. Voya manages over $245 billion in assets. Previously she was VOya’s CIO of Fixed Income. The company began its 40-year history as ING before the name change and is a . U.S Top-25 manager of U.S. institutional and defined contribution assets Hurtsellers has been named to numerous most influential women in finance lists, most recently, she was named to Barrons top 10 most influential women in wealth management.


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