Investment Philosophy

Always proactive, always in-depth

At Key, we believe that it is imperative to be both active and proactive managers. We continually ask ourselves if we had to build up our portfolios from scratch, would they differ much from what we have today. If the answer is ‘yes’ then we rebalance. This approach ensures that every investment is based on active and current analysis alone.

This activity is not at the expense of depth or thoroughness. When selecting hedge funds we meet with the underlying funds’ managers for face-to-face in-depth meetings wherever possible and continue post-investment with regular monthly conversations. This is supplemented with painstakingly in-depth analysis of all individuals and processes within the hedge fund. Many have told us ours is the most in-depth process they have been subjected to.

Risk control has to be a primary focus and an integrated part of the investment process

Risk measurement and control should be active at every step of the investment process.  We use our risk systems to find where the risks lie in potential investments long before we invest. If the risks being taken are too insidious or opaque to analyse, then nobody can know how the returns are generated and the investment should be left well alone.

Some strategies should be avoided

There is a wide range of strategies in the hedge fund world with vastly different approaches and levels of risk. If a strategy is too illiquid, for example, or carries an unacceptable level of worst-case risk then we would rather avoid it, however attractive it may look in ‘good times’.

Do not ignore difficult-to-measure risks and worst case scenarios

It is not good enough just to measure the obvious risks. We believe it’s our job to identify all risks in an investment, however difficult they are to find and quantify. By always asking ourselves "what’s the worst that can happen?" we impose a strong focus on downside control. Generally, if after this analysis an investment looks 'too good to be true', we assume that there are risks that are yet to be discovered and stay well away.

Always avoid black boxes

Both the Chief Investment Officer and the Head of Risk Management hold PhDs in quantitative areas but if that has taught them one thing it is "never rely solely on quantitative analysis". Our process is a rigorous qualitative one. Although it is backed up by the best quantitative tools, investment decisions are never made on the back of quantitative analysis alone.