- The Fund is a quantitatively biased, multi-asset, multi-strategy, macro-thematic fund, investing into fixed income, equity, commodity and FX product markets.
- The Fund is focused on absolute returns and targets positive returns irrespective of market conditions.
- The Fund targets an annualised volatility of 5% and aims to deliver net returns that exceed the STeFI by 5% per annum over a rolling 3-year investment period.
- The Fund is appropriate for investors who have a moderate risk profile and who aim to preserve and grow the real value of their assets with a low level of capital risk over the medium term.
- The Fund is Registered as a Retail Investor Hedge Fund in accordance with the new Hedge Fund CISCA regulations and available on the Prescient LISP platform. MDD download link
The investment strategy is predicated on the identification and analysis of macro thematic trends, imbalances and inflection points in the risk premium relating to the main asset classes.
The investment thesis is resolutely top-down based on macro thematic trends. Our top-down process narrows down to investment opportunities in equity, fixed income, forex and commodity product markets through QUANTAMENTAL analysis.
Quantamental analysis is the expression of fundamental analysis, through quantitative methods, to try and remove the emotions out of the investment research process.
Our approach to investments can be characterised as the systematic implementation of traditional analyst’s methods. Our systematic approach provides reason, clarity and discipline to our process. The objective of our investment process is to try and identify the risk factors that are being rewarded in a certain macro environment. The opportunity set is divided into different risks, such that the risk factors correctly segment different parts of the opportunity set.
“The essence of investment management is the management of risks, not the management of returns” – Benjamin Graham.
Our investment process is underpinned through the allocation of risk and not capital. Our aim is to balance market risk across investment strategies; our idea of risk is not informed by an asset class, but by the risk inherent in an investment strategy.
It is our belief that macro thematic analysis – the identification and analysis of macro thematic trends, imbalances and inflection points in the risk premium relating to the main asset classes, offers considerable scope to add investment value.
The identification of such themes and assessing their implications for investment markets and individual assets provides the framework for the construction of the Fund. It is our belief that the application of this systematic approach to investments creates a flexible architecture, providing a platform for the generation of investment returns regardless of market conditions, by investing wisely and on the right terms.
Our aim is to have a portfolio with multiple concurrent diversified investment strategies. Correlation can be misleading and poorly suited for constructing a diversified portfolio. The crux of the problem is that correlations are highly variable and critically dependent on prevailing circumstances.
In our portfolio construction and risk management processes we focus on the underlying drivers that are expected to affect positions and strategies. The drivers are the cause, the correlation is the consequence. In order to ensure a diversified portfolio, our portfolio construction process aims to implement strategies that have different drivers through a proprietary principal component optimisation process.
The portfolio construction process is therefore largely a continuous risk budgeting process subject to the mandated investment parameters of the Fund.
Risk is the possibility of loss of capital. In trading and investing in markets, risk is unavoidable and the best one can do is to manage it. The objective is to monitor and manage the capital at risk of each trade individually and the capital at risk of all trades collectively on a real-time basis.
Our approach is influenced by our strong risk management backgrounds. We empower our clients via quantitative and qualitative risk monitoring to understand the trade-offs between performance, risk and liquidity and to have better control of their investments.
Risk management is embedded into our investment process, starting with individual positions through to our portfolio construction process, providing a systematic and integrated risk management approach. Risk management depends on the objective behind a particular trade or opportunity. The key assumption underlying the subjective distribution of outcomes must be clearly identified. The risk question “what if the trade is wrong (or goes)?” must have a satisfactory answer in isolation and the worst-case sample path being acceptable. We manage risk through applying limits on position size, defined stop loss, using similar positions to hedge risk exposures and the use of derivatives.