Portfolio performance is ultimately driven by asset class selection and is, therefore, a key determinant to successful portfolio management. Based on this, we believe by tactically managing across the asset class spectrum we are better able to invest in those areas of the market that offer the best combination of risk and reward. Asset class management defines our investment philosophy and is our greatest value-add in the investment process.
We follow a top-down, macro-driven investment style, which drives our tactical asset allocations. Tactical asset allocation is a natural extension of a top-down approach and involves dynamically shifting exposures across the asset class spectrum based on our macro views. Through this approach, we focus on the “big picture” to gain an understanding of emerging trends and macro themes that affect financial markets. These macro-driven trends serve as a blueprint upon which we base our investment decisions. Understanding trends before they are priced into markets is our primary goal.
We adhere to a disciplined and repeatable investment process that makes use of fundamental, quantitative and technical perspectives:
Our investment process begins with understanding the fundamentals that drive asset class performance over the long-term including, but not limited to, economic growth, corporate earnings, central bank policy, and the risk environment. Many factors are included in this fundamental framework, such as GDP components (including business investment, trade, consumer spending), corporate fundamentals (including earnings, revenue, margins, leverage, etc.), and long-term trends (such as demographics and deleveraging).
Quantitative analysis helps us understand what’s priced into markets. This helps avoid over-crowded trades and assists in spotting trends before they’re priced into markets. Applying a quantitative overlay gives us a better understanding of potential risks and rewards.
Technical analysis provides an additional layer of market interpretation. Technical analysis includes use of shorter-term charting techniques, sentiment surveys and other market indicators that can offer insight into financial market performance.
Understand the fundamental drivers of economies and markets
Determine what has been priced in using quantitative techniques
Apply technical analysis to uncover market dynamics and trends
Define tactical asset allocations
Monitor, re-balance and repeat