Wellesley Investment Partners manages investment portfolios that are catered to the specific needs, time horizons and risk tolerances of our clients. The firm’s investment philosophy is outlined in our three principles of investment management:

Principle 1: Investment Portfolios Should be Broadly Diversified Across Global Markets and Multiple Asset Classes: We implement client portfolios using low-cost ETFs and individual securities.

Principle 2: Economies and Markets Exhibit Cyclical Behavior: Our research attempts to identify where we are in the business cycle and position client portfolios accordingly.

Principle 3: Investment Decisions Should Follow a Systematic, Research-Based Process: It is important to try to avoid succumbing to emotional behavior by buying high and/or selling low. Following a systematic approach helps mitigate this risk.

Wellesley Investment Partners’ research team has broad experience in both portfolio management and economic analysis. We manage several investment strategies and may utilize a combination of U.S., international, and emerging market equity, fixed income, commodity and real estate ETFs, as well as individual stocks and bonds to build client portfolios.

At the core of our investment strategies is our business cycle research. We believe fluctuations in the economy can consistently be attributed to six groups of factors which generally offer a reasonable guide for recognizing the different phases of the financial cycle:

  • GDP growth
  • Credit growth
  • Corporate profits
  • Interest rate levels
  • Investor confidence
  • Inflation

It is our belief that these six factors generally offer a practical guide for recognizing the different phases of a business cycle. Our investment framework attempts to recognize where we are in the cycle and adjust our asset allocation accordingly. Client portfolios are positioned in a manner which attempts to add incremental value when we think market conditions are favorable, while attempting to reduce losses experienced when economic conditions deteriorate.

EARLY CYCLE PHASE: The economy recovers from the preceding recession and asset class performance tends to be robust given beaten-down valuations. Riskier assets such as emerging market, mid-cap and value equities, as well as REITs, have historically outperformed during this phase. In general, GDP rebounds from low levels, credit growth accelerates, profits grow rapidly, interest rates decline, confidence bottoms and then begins to rise and inflation remains benign.

MID-CYCLE PHASE: The economy moves beyond its initial stage of recovery and growth rates moderate. Strong performance in risk assets such as mid-cap and emerging market equities has historically persisted throughout this phase and international markets also tend to participate in the rally. Stocks remain more desirable than bonds. This tends to be the longest phase of the business cycle. GDP growth tends to moderate from the more rapid pace set in the early cycle, though it remains steady. Profit growth peaks, interest rates begin to rise at the long-end of the curve, investor confidence increases and inflation begins to rise. Monetary policy tends to remain relatively accommodative as it gradually shifts to a neutral stance.

LATE-CYCLE PHASE: The warning signs begin to flash as the economy enters the late-cycle phase. Overall stock market performance remains modestly positive, though it tends to slow relative to the early and mid-cycle phases. Commodities tend to perform well during the early part of the late-cycle as inflationary pressures accelerate and demand remains solid. GDP growth tends to slow as credit conditions tighten. Interest rates increase and investor confidence peaks as inflation moves higher. Economic growth rates slow as monetary policy turns more restrictive and corporate profit margins erode.

RECESSION PHASE: The recession phase has historically been the shortest phase, though perhaps the most dramatic. Declining economic activity drives down both sales and profits. Equity falls, at times sharply, while falling bond yields push up bond prices. As growth stalls and then contracts, defensive sectors (e.g., utilities and health care) tend to perform better than those that are more economically sensitive. Gold tends to preserve value, especially if market volatility intensifies. Long maturity Treasury bonds have historically been one of the best performing assets during this phase. Corporate profits decline and credit becomes increasingly scarce for all market participants. Monetary policy becomes more accommodative as rates fall, accompanied by both plummeting investor confidence and falling inflation. All of which, in theory, sets the stage for the next economic recovery and the beginning of the next early cycle phase.

Notes and Disclosures

Target allocations are subject to change without notice, based on the firm’s global investment views. Clients choose their investment strategies based on their particular investment objectives, time horizon and risk tolerance in consultation with Wellesley Investment Partners investment professionals. This web site may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward looking statements.Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.

Additional Disclosures