Investment Methodology

The stock market contains a multitude of interrelated return effects that form predictable patterns of mispricing across stocks and over time. In order to detect these patterns we have done extensive research and we aimed our research at disentangling the patterns, separating each from the effects of the others.

Our investment approach begins with a broad equity universe of stocks. It provides us a coherent evaluation framework that benefits from all important factors that have an impact on share prices, garnered from a wide and diverse range of securities, including variations in price behaviour across different types of stocks. This approach takes advantage of more profit opportunities than a more segmented approach can offer.

Risk Management

Risk Management is a critical success factor for any fund to survive. For us it is the basis of our investment philosophy and it is systematically applied in every step of the investment process. It is found back in the portfolio hedging techniques, liquidity controls, position sizing, number of investments, diversification over factors, sectors, countries and currencies, frequency of rebalancing, operational procedures, use of leverage, counter party management, funding methodology, AUM size management, copycat prevention, key man issues and all other steps in the investment process.

Universe

The models are applied to any substantial large equity-universe encompassing listed stocks in over 60 countries worldwide. The final universe is selected on the basis of market liquidity and analyst coverage.

Multi-factor

Multi-factor models are used based on factors mainly related to valuation, earnings-momentum, consensus investment analyst forecasts, dispersion in earnings forecasts, earnings revisions, earnings quality and many other criteria.

Dynamic

Models used in quantitative asset management are often static and therefore only add value in certain time periods. Our models are dynamic; our factor weightings change constantly. This is a reflection of our core philosophy; market regimes always change but systematic equity models should themselves incorporate change and not be tweaked over time.

Weighting Process

The outcome of the models, a large stock portfolio, is always the result of endless and ever changing factor combinations. The models recognize which factors are important in a certain time period and add value in different market regimes.

Portfolio

The portfolios are always well diversified over all sectors and more than 60 countries. The average portfolio consists of 120-200 stocks.

Rebalancing

The portfolios are rebalanced during regular time intervals.

Dynamic Hedge

We dynamically hedge our long stock positions with shorts replicating the relevant benchmarks.