We blend top-down asset allocation with bottom-up investment selection.
Major top-down investment process elements include the analysis of the macro-economic environment and observations on individual financial market asset class returns. The objective of this process is to shape a scenario-based investment view. A semi-annually reviewed, long-term Strategic Asset Allocation is agreed upon, and Tactical Allocation Ranges are derived to adjust to intra-year market developments and changing risk-/return-expectations.
Elements of the bottom-up investment process are best described by three basic steps, i.e. selection, implementation and the final portfolio construction.
Security selection is at the core of the value-creation in a bottom-up process.
Identifying business investment opportunities that offer stable and above-average cash flow return patterns, will not only lower the risk of permanent loss but more importantly increase the probability to achieve consistent positive real returns.
Once selected, we implement the investment by either directly purchasing the underlying security or alternatively build a derivative overlay to capture the intended return sources. Finally, the portfolio construction assigns larger weights to higher convictions while adhering to the client’s targeted risk profile.