Like the managers we specialize in, we take a systematic approach to asset allocation. It all starts with you and your requirements, and takes off from there.
Scour the universe of quant funds to meet your mandate.
Search & Screen
There are around 10,000 hedge fund programs accessible via separately managed accounts, SMA platforms, and commingled funds. In addition, there are 600+ liquid alts products. And then there are the programs that are not even in the databases!
It’s a big universe – we make it manageable.
For each investor, we start with three questions:
- What are your objectives?
- How much capital will you deploy?
- What are your “hard” constraints?
The answers to these questions will define our search and screen mandate. We build a set of screening rules and apply them across industry databases. We tap our network for undiscovered gems you won’t find in the databases. Our goal is to narrow the universe from thousands to hundreds, while retaining all the high-potential candidates.
Go beyond the standard statistics to reveal the deeper story hidden in the numbers.
Many of the standard manager performance statistics are ill-constructed for their purpose. If you rely exclusively on them you will experience lower returns, larger down-side surprises, greater correlation, and worse drawdowns than you expect. To differentiate effectively between managers you need to uncover the deeper story hidden in the numbers.
Like the managers themselves, we take a systematic approach to manager quantitative analysis.
We use mathematical clustering to divide the candidates into distinct groups driven by your investment mandate. We then compare managers to their peers within their own cluster.
Our proprietary suite of statistics is specifically designed to differentiate between managers using the most highly prized features of their performance. We pay particular attention to skew, conditional value at risk, correlation, and autocorrelation.
Many of the statistical measures we use are enhanced to make them more fit for purpose, less susceptible to outliers, and more robust. Detection of change algorithms help identify discontinuities in the performance record to avoid crediting or penalizing a manager for past performance that is unlikely to be repeated.
We narrow the field of candidates down to our contenders, organized into groups, ranked, and ready to move on to the trading system due diligence phase.
Manager Risk Profile: Quantitative Due Diligence
To evaluate a manager’s performance, you need to see the full landscape, not just a snapshot. Our Manager Risk Profiles provide an in depth quantitative view of a fund’s expected performance and risk, so you can make the most informed allocation decisions.
25 – 50
Protect against system-related risk with research & development due diligence review.
Trading System Due Diligence
Systematic programs compound the challenge of protecting your investment from the risk of fraud and operational error. To achieve the confidence you need to write a ticket:
- You must understand and be comfortable with the mathematical principles of the trading system.
- The manager must demonstrate rigorous development and testing processes.
- The trading system must be deployed, managed, and monitored in a robust manner.
From years of developing trading systems, and as director of research at The Bornhoft Group, an award-winning pioneer in multi-manager CTA funds, I have a firm grasp on the processes required to design, test, tune, and deploy a systematic trading strategy.
While we cannot relieve you of responsibility for completing your own thorough due diligence, any contender who fails to pass our rigorous trading system due diligence will not be considered as a finalist for inclusion in a portfolio.
5 – 20
Build robust portfolios capitalizing on uncorrelated alpha.
You have searched the universe of managers, analyzed them in-depth, completed extensive due diligence, and are now ready to make your allocations. It took a lot of work to select your finalists.
Standard portfolio construction methods such as MPT ignore the very performance characteristics that you are paying a systematic manager to deliver. In addition, they make assumptions about your preferred measures of risk and return.
We employ our Empirical Space Portfolio model to:
- Optimize for multiple risk-return objectives, finding Pareto optimal sets of portfolios.
- Capitalize on key performance characteristics of your selected managers.
- Respect as many or as few constraints as your investment policies require.
We use Monte Carlo techniques, which preserve key features of the managers’ historical returns (the empirical data), to evaluate the expected performance of each potential portfolio. Depending on the number of managers and the allocation increment, the portfolio search space can be immense. We employ a variety of optimization algorithms from exhaustive, through gradient descent to genetic search, to find the set of optimal portfolios.
We build portfolios that are optimized to your specific objectives: we put you firmly in the driver’s seat.
Portfolio Risk Profile: Better Allocation Decisions
As a portfolio manager you want to construct the portfolio that keeps risk within tightly controlled limits. This requires a deep understanding of the mechanics of your portfolio. Our Portfolio Risk Profiles show you how the components of your portfolio interact and where your portfolio stands in the risk-return landscape.
Portfolio Optimization: Your Allocation Edge
We believe you should be able to choose the portfolio performance and risk characteristics that are important to you and your customers. Our unique approach to optimization puts you in control of your portfolio, giving you an edge over traditional approaches.
Datasheet: Portfolio Optimization: Your Allocation Edge
What's on your mind?
We are always interested to hear from anyone in systematic trading whether as an investor or a manager. Call or use the contact form. Let’s discuss your goals and how to achieve them.
Phone: 303 842 1669
Location: Boulder, Colorado, USA
Business Hours: 8am – 5pm M-F Mountain