API Investment Strategies
High Conviction Strategy (HCS)
HCS is a concentrated global equity strategy. We employ a value-oriented active approach where we combine our quantitative stock selection model with the team’s fundamental knowledge of global equities, to create a 25-30 name portfolio. An active risk target of 4-5% pa to a Value Weighted benchmark means we expect periods of significant deviation from broad markets.
Our quantitative model employs a multi factor approach:
Value: Multiple valuation factors to identify companies with lower expectations for their future cash flow growth and profitability
Momentum: Companies with evidence of a catalyst are better prospects: superior short-medium term volatility adjusted relative performance and earnings revisions
Quality: Companies that are better able to withstand adverse developments: sensible leverage, stable earnings growth and greater expected return on equity.
We verify the quantitative results with sensible fundamental analysis which assesses the following attributes:
Accounting: The nature and content of Financial Reports & Accounts. Is there any evidence of ‘aggressive’ accounting or changes in accounting reporting?
Strategic: Is our Quant model being ‘fooled’? Is there evidence of a decline and impairment of assets and thus a good reason for the share price to appear cheap? How distressed are the target asset’s competitors? Are there new market entrants or departures?
Governance: Is there sufficient separation of executive functions? The nature of asset share classes, particularly non-voting share attributes? Appropriate service provider independence?
We create an ESG score for the portfolio and compare this to the benchmark
Global Alpha Plus Strategy (GAP)
GAP is a value-oriented strategy which captures the Beta(s) of the MSCI World Value Weighted index and enhances return through the VMQ superior stock selection process.
We more efficiently provide the value-oriented Beta characteristics through portfolio construction risk control together with a strong stock evaluation process that selects the stocks we expect to outperform over time. GQS holds between 150-200 names with an active risk target of less than 3% pa and rebalances to the benchmark on an ‘event’ basis.
Asia Small Cap Alpha Plus Strategy (ASAP)
ASAP is a value-oriented strategy that applies our VMQ stock ranking and portfolio construction process in a similar manner to the GAP strategy, with similar stock holding and active risk targets. ASAP provides the Beta characteristics of the MSCI All Country Asia Pacific ex Japan Small Cap Value index through robust portfolio construction risk control and return enhancement through the VMQ superior stock selection process.
Given the increasing role of government in Asia Pacific economies we believe that smaller companies are more dynamic and less likely to make decisions on capital allocation for political reasons.
We offer a combination of ‘timing’ models and asset class definitions to periodically recommend exposure adjustment to different asset classes. We monitor factor indices to provide equity style tilts and map private equity, or illiquid assets, to equivalent listed assets allowing us to offer a full asset allocation model combining Beta and Alpha.