“It’s statistical analysis overlaid with traditional work, we’re trying to classify sources of risk and return – how much is from alpha, how much is from superior risk controls. We’re trying to decompose a manager’s return into components.”
Dr. Robert J. Frey
Reuters, November 2010
The investment process combines rigorous quantitative and qualitative analysis. The aim is to select and allocate to managers that offer superior risk-adjusted returns and high levels of persistent alpha.
It entails three stages:
- Quantitative screening: identify funds that offer superior levels of alpha to competitors combined with attractive risk / return characteristics over time. A range of techniques is used but at the core of the process is a powerful proprietary factor model developed internally using advanced statistical techniques.
- Rigorous qualitative, quantitative and operational analysis: conduct deep due diligence to understand and substantiate through evidence, the full spectrum of factors that may be driving performance for the fund and the broader business.
- Portfolio allocation and optimization: use quantitative techniques to manage systematic risk and maximize return, prioritizing capital preservation. Qualitative factors are also utilized as a component of the allocation process.