volatility

Formed in 2008, Fort Point is a boutique asset advisory for high net-worth individuals. We focus on delivering superior risk-adjusted, after-tax returns through the disciplined application of Transparency, Liquidity and Simplicity. We believe in creating a positive investor experience by managing variables such as tax efficiency and cost management over which we can exert firm, measurable control. Our success is measured by our ability to dramatically reduce portfolio volatility, increase liquidity and outperform in periods of market decline.

The Asymmetry of Losses

We believe in the certainty of market variability and, consequently, the portfolio impairment caused by volatility and coordinated drawdowns. Assets are more highly correlated in market upturns than downturns so, while many investors attempt to

maximize returns by capturing more upside, we believe it is more practical and sustainable to grow returns by reducing losses. As demonstrated below, losses are linear, but the gains and time required to recover are exponential.

Gain Required To Recover Loss

Diversified Portfolio

A truly diversified portfolio of $10 million has a significantly greater probability of achieving sustainable returns over time than one which tracks the broad equity markets such as the S&P 500 Index. This is because protection against coordinated drawdowns is best achieved by focusing on the breadth, selection and individual risk of the underlying assets, not simply by holding a mixed-bag of securities. Most importantly, returns from the securities are non-correlated.

Beating Biases

In every market bubble, bust or “normal period”, investors make decisions believing that “this time is different”, allowing embedded cognitive biases to overrule discipline. Sustainable returns, however,

require investment discipline during market selloffs, not merely chasing gains in euphoric conditions. We aspire to control the controllables, and that includes placing controls on ourselves.

Gambler's Fallacy The tendency to think that future probabilities are altered by past events, when in reality they are unchanged. Hyperbolic Discounting The tendency for people to have a stronger preference for more immediate payoff relative to later payoffs, where the tendency increases the closer to the present both payoffs are. Selection Bias A distortion of evidence or data that arises from the way that the data are collected. Wishful Thinking Tendency to overestimate the probability of good things happening to them. Stereotyping Expecting a member of a group to have certain characteristics without having actual information about that individual. Bandwagon Effect The tendency to do (or believe) things because many other people do (or believe) the same. Disposition Effect The tendency to sell assets that have increased in value but hold assets that have decreased in value. Confirmation Bias The tendency to search for or interpret information in a way that confirms one's preconceptions. Endowment Effect The fact that people often demand much more to give up an object than they would be willing to pay to acquire it. Pseudocertainty Effect The tendency to make risk-averse choices if the expected outcome is positive, but make risk- seeks choices to avoid negative outcomes. Recency Effect Tendency to weigh recent events more than earlier events. Focusing Effect The tendency to place too much importance on one aspect of an event; causes error in accurately predicting the utility of a future outcome. Normalcy Bias The refusal to plan for, or react to, a disaster which has never happened before. Last Illusion Coined by Brian Eno, the belief that someone must know what is going on. Primacy Effect Tendency to weigh initial events more than subsequent events. Hindsight Bias Sometimes called the "I-knew-it-all-along" effect, the tendency to see past events as being predictable. Outcome Bias The tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made. Negativity Bias The tendency to pay more attention and give more weight to negative than positive experiences or other kinds of information. Bias Blind Spot The tendency not to compensate for one's own cognitive biases. Survivorship Bias Tendency to concentrate on the people or things that "survived" some process and ignoring those that didn't, or arguing that a strategy is effective given the winners, while ignoring the large number of losers. Zero-risk Bias Preference for reducing a small risk to zero over a greater reduction in a larger risk.

Bubbles & Busts

The typical advisor mantra insists that maximum returns are achieved by maximizing time spent in the market. In reality, missing the worst days of market performance

is more important than capturing the best ones. This is the basic math of returns: losses are linear, but the gains required to recover are exponential.

Bubbles And Busts

Controllable Factors

Our Take On Risk

Controlling the Controllable: While asset performance is wholly out of an investor’s control, Fort Point’s investment discipline is grounded in identifying those variables that we can optimize to increase client returns: risk, liquidity, tax efficiency and cost management. Owning a portfolio of assets that behave similarly over time (and particularly in times of stress) increases the risk of catastrophic, coordinated drawdowns.

Global Equities The tradeable stock or capital stock of a business entity represents the original capital paid into or invested in the business by its owners. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value. The growth of equities correlates to the underlying growth of the business. Real Assets In contrast to global assets, these are tangible or physical assets in nature (eg. real estate, commodities, stamps, art, radio frequencies, water rights). Yield & Rates Securities issued by governments or corporations, which pay a fixed or variable interest rate at regular intervals and repay principal on maturity. Defensive Investment techniques and strategies that either capture risk premia (beta) and/or obtain excess returns (alpha) with low overall correlation to the securities in which they trade (ie. equities, commodities or bonds).

Fort Point allocations consider both quantitative (number and correlation of assets) and qualitative measures (exogenous events that impact volatility). We actively monitor and rebalance asset exposures to most efficiently enhance portfolio diversification and the probability of a consistent, positive return experience.

Our approach to allocation

Superior asset correlation and breadth of underlying diversification are key to achieving positive expected returns with reduced risk. Note below the correlations to the S&P 500 over a 3 year period from a standard allocation to a core allocation and, optimally, to our Active Risk Management allocation.

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Standard

The traditional advisor approach to portfolio diversification is a blend of equities, fixed income and cash. This strategy works fine in a bull market but, without due attention to asset correlation and dynamic rebalancing, is a perfect setup for substantial, coordinated losses when the market turns.

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Diversified Core

More than 48 distinct securities are selected across the entire spectrum of asset classes, geographies and strategies to achieve capital appreciation while mitigating market drawdowns. We focus on liquid investments to dynamically rebalance our portfolios for active tax-loss harvesting.

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Active Risk Management

Despite broad diversification, highly correlated assets coupled with market volatility leave portfolios over-exposed at precisely the wrong time. We employ an enhanced option overlay strategy to systematically reallocate in any market environment, thus offering investors the benefits of broad-based index investing with superior risk management.

Custody Solutions

If Investment Advisors compete for your business, so should the platforms that service it. A custodian, for example, can be an invaluable partner in dynamically managing, administering and overseeing institutional

investments. We select our institutional partners by their ability to provide a stable platform while reducing your explicit and implicit costs, ensuring clients receive the execution and value they deserve.

Opportunity Set

The Team

Ralph M. Drybrough
Managing Partner at Fort Point Capital Partners
  • Principal at Presidio Financial Partners
  • Merrill Lynch Private Banking and Investment Group
  • UBS Private Wealth Management
  • Indiana University
Jeffrey D. Wycoff
Managing Partner at Fort Point Capital Partners
  • Principal at Presidio Financial Partners
  • Merrill Lynch Private Banking and Investment Group
  • UCLA
James Marchi
Chief Compliance Officer at Fort Point Capital Partners
  • Examiner for the Securities and Exchange Commission
  • Manager, Business Surveillance Systems Automation at the Pacific Stock Exchange
  • MBA from UC Berkeley
  • University of San Francisco
Jack Harrington
Managing Director at Fort Point Capital Partners
  • General Partner at Advanced Technology Ventures
  • CEO of ObjectStream
    Board Member at Xicor
  • Vice President at AT&T
  • MBA from the University of Colorado
  • Iowa State University
Angeles Gottheil
Analyst at Fort Point Capital Partners
  • Consultant at FINCA International
  • Georgetown University, SFS
Kathryn Urban
Analyst at Fort Point Capital Partners
  • Morgan Stanley Private Wealth Management
  • University of Pennsylvania

Contact Us

Fort Point Capital Partners LLC
275 Sacramento Street
8th Floor
San Francisco, California
94111

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