“The goal of climbing big, dangerous mountains should be to attain some sort of spiritual and personal growth, but this won’t happen if you compromise away the entire process.”
The long-term is a less competitive space when it comes to producing investment returns, while enabling better position sizing and risk management.
We thrive when we are not bound to annual calendars, though we respect client accounting and reporting obligations.
Our initial macro evaluation mainly spans a two-dimensional coordinate system comprised of the economic growth level and the prevailing inflation level. Depending on which quadrant the prevailing environment resides at any given period, we identify a combination of the preferred asset classes and the constituent industry sectors. We map market forces based on a set of specific variables and key indicators and identify discrepancies and dislocations regardless of the underlying exposure. We look for asymmetries and formulate our recommendations on a risk-to-reward basis, always within a balance of a probabilities framework.
Once an asset class and an industry sector have been selected, we decide the weights of the chosen exposures. Our empirical acumen has led us to believe that markets oscillate over time between various states of efficiency, often driving the allocator to tilt the core strategic allocation with tactical over- or under-weights so as to capture untapped sources of returns. To form views for the projected behavior of an asset class with a certain probability of occurrence, we apply short-term quantitative (technical), medium-term quantitative (valuation, momentum and liquidity) and qualitative (such as Central Banks' forward guidance) analysis.
Once the asset allocation distilling has been finalized, we select the trading instruments that will populate our allocation pie and which provide the most faithful strategic representation of the selected investment themes. We identify tested and highly liquid instruments that encapsulate our views in a cost-effective manner.
We work with investors who have long-term investment horizons, who wish to utilize our dynamic asset allocation approach to protect purchasing power over time and generate inflation- and risk-adjusted returns through full market cycles, understanding that the majority of portfolio returns are generated through asset allocation, position sizing and matching trade horizons. Capital preservation and capital enhancement can be achieved in the long-term via a research-intensive idea generation and disciplined investment process that is not obsessed with short-term return maximization targets. Our experience dictates that longer-term horizons mollify the distortions that human cognitive biases bring into investment decision-making processes.