We define the three components of our investment process as follows:
- Idea Generation: Independent, real-time, unfiltered views are generated by analysts on a broad range of drivers of potential above market returns
An alpha source is a unique, investable object or relationship with an ascertainable price. To be actively maintained and invested, an alpha source must have sufficient opportunity to allow return capture. Another requirement to maintain active status is management’s expectation of positive investment skill. A position signal is a judgement of the near-term expectation for the behaviour of the alpha source price. Fundamental to our philosophy, we believe an alpha source and associated position signal must be backed by research. Research is the process for creating an investment view and is stored within our Investment Opinion Network (ION).
- Design: We use a transparent portfolio construction framework to select and size which views will be used to produce the client’s desired outcome
Design is the framework we use to customise/define how an investment mandate will use its allowed investment discretion to achieve its performance objectives. This framework for design is built around the concept of the integration of client objectives, investment skill, and market characteristics. We believe our approach to design is one of the defining features and differentiators of our proposition, given the level of customisation and transparency offered. Portfolio objectives can be the objective or alpha target, risk target or other performance based hurdles.
- Process Management: A proprietary feedback mechanism measures the effectiveness of the investment process and incorporates real-time adjustments
There is a thorough process that overseas our idea generation and design elements. Via our thorough alignment process we measure and monitor investment skill - both expected and actual. Using data stored in ION, alpha source history, and experience, we can estimate realistic skill levels across all available alpha sources used in our product designs and proposals. We then monitor the ’capture‘ of this skill. Skill measures serve a variety of uses within our investment process: They help in estimating the information ratios of signals, they help link analyst objectives with product designs and they help evaluate behavioural deficiencies that lead to poor signalling outcomes. We also ensure that operating process stays aligned with the meeting the client’s needs and objectives.