Investment Process
Our investment process consists of 3 major levels of analysis:
Strategy Analysis
Here we make decisions on which hedge fund strategies are most favourable in outlook for the next 3-12 months. At the heart of the process lies two main sources of information – one quantitative and one qualitative. Quantitatively, we generate a quarterly report that analyses the drivers of risk and return for each strategy as well as the size of the opportunity set going forward and the assets in each strategy. This is counterbalanced by our own qualitative intelligence gathered from a broad range of finance professionals, from economists through to traders. On the back of these two orthogonal approaches, a strategy allocation decision is made.
Manager Analysis
Each year we hold more than 500 meetings with hedge funds across the United States, Europe and Asia. From these meetings we find maybe 5-10% of funds are potential investment candidates and then we begin our in-depth manager selection process. In this process we analyse the underlying funds from personnel, investment process and risk process through to back office, valuation procedure and third parties. Very simply we are looking for edge, risks being taken and what can go wrong; however, it is imperative that no stone is left unturned in this search and the result is a report consisting of 50+ pages of analysis for each fund we consider.
Risk Analysis
Our risk process (of which more in the Risk Management section) is fully integrated into the investment process, allowing us to fully understand the risks taken by a prospective investment at an early stage. Thus, by the time we consider the hedge fund for investment, we are confident we know, understand and accept the risks that are taken to generate the returns we hope to access.
Summary of Investment and Risk Process