Investment Approach
Our investment philosophy is implemented through a disciplined investment process.
Manager Selection – We focus on fundamentally-oriented, hedged managers who invest in inefficient segments of their markets. These managers reduce risk through balanced long and short exposures and disciplined portfolio construction, instead of relying solely on good security selection. We emphasize manager’s alignment of interest with investors, as demonstrated by capital invested in the fund, asset growth discipline appropriate to the manager’s strategy, and willingness to share portfolio information. We avoid managers who make heavy use of leverage and derivatives, employ “macro” strategies, or are unwilling to provide risk transparency on their portfolios.
Portfolio Construction – At the portfolio level, we seek to diversify assets across strategies, market capitalization, industry sector, and geographic exposure. Individual manager weights are determined based on volatility, beta, correlations, net market exposure and our familiarity with the manager. We review and rebalance strategies and managers on a regular basis, and limit each manager allocation to no more than 10%.
Risk Management – We employ a multi-dimensional risk management approach that focuses on investment, organizational, and operational risks, as well as risk of fraud. Our due diligence includes conducting comprehensive reference and background checks on key principals of underlying managers, as well as on manager’s third party relationships, including the prime broker, administrator, audit firm, and legal counsel.
Ongoing Manager and Portfolio Oversight – We perform extensive initial and ongoing due diligence and risk management using a combination of quantitative and qualitative criteria.
