What We Do
Our process starts with asking what is the data telling us? From there we structure solutions based on what we observe. For decades the most common investment strategies have centered around buying into stocks with the expectation of them rising in value in the future. This approach is highly unsophisticated and relies on the assumption that all stocks will rise over time. We know the market is much more complex than this. Stocks and other assets have periods of both positive and negative returns, and some that go to completely bust, these are the properties of all markets. The best investment strategies accept these properties and seek to take advantage of them.
Engineered for all market environments
Capitalizing on these movements isn’t easy, however. It requires a tight interlock between knowing the problem and having the skills to actually tackle them—data, technology and the proper algorithm(s). Our algorithm is particularly useful in the analysis of trend-following, momentum and mean-reverting financial prices—three primary movement types observed in each market environment. We then layer this analysis across a large group of stocks and asset classes to discover patterns and insights where we previously didn’t know they existed. We observe these patterns on multiple time scales and monitor them daily for breaks or deviations. If new patterns arise or an old ones disappear, we will notice them and adapt accordingly.
Combining strengths, removing emotion
We understand that the most powerful methods are those that incorporate the greatest strengths of both humans and computers. We regularly monitor our algorithm to ensure all positions are in accordance with the objectives of each portfolio. Every process carried out by our program is knowable, viewable, and follows a strict set of rules written in the code. This provides us with a level of consistency and transparency that is simply not possible with any human. Our algorithm doesn’t take sick days, nor is it affected by ulterior motives or the damaging emotion of investment losses. Reliability is our business.
Efficient investment vehicles
In the spirit of efficiency and transparency we do not invest our clients in mutual funds. We do this for multiple reasons, the first being that mutual funds often have much higher costs associated with them compared to their more lean counterpart, the Exchange Traded Fund or ETF. Secondly, the control provided to us by stocks and ETFs is necessary for our risk management requirements. With stocks and ETFs we have intraday liquidity, meaning we can move in and out of these positions near instantaneously—a luxury not provided by mutual funds. Thirdly, many mutual funds have managers, which is an unnecessary feature for us (as we directly manage every client portfolio) and we view it as an additional source of variable risk.