Quantitative Analysis
Returns-Based Analysis
We carry out extensive quantitative analysis but statistics inform the qualitative side rather than driving it. We believe that investment management is a combination of art and science and we do not believe it is possible to assess a fund from a purely statistical perspective without understanding from a factual and qualitative perspective what it is trying to achieve. We aim to build up an overall picture of past performance characteristics by using several different techniques rather than applying undue emphasis on a single aspect of performance. Crucially, we seek to understand what has driven past results and measure these against the fund's stated objectives and mandate, rather than a broad industry peer group. We then compare funds with similar objectives against one another before deciding which we believe to be superior.
Through our own quantitative returns-based analysis we evaluate a wide range of statistical evidence which helps us to build a picture of how returns have been generated. This includes the assessment of a range of absolute and relative returns statistics as well as considering a number of risk measures. We also consider any style and market capitalisation influences for equity portfolios.
We believe that risk and reward need to be assessed together. In simple terms we seek to ensure that managers who are exposing their investors to higher levels of risk compared with their peers are generating sufficient excess return on a consistent basis to compensate for the extra degree of risk.
Portfolio and Trading Analysis
We have also developed our own proprietary portfolio and trading analysis. This enables us to examine portfolios at the stock level and monitor portfolio changes over time. This information enables us to conduct our review meetings effectively by being aware of changes to a manager's portfolio and the stocks that have been driving returns.