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PHILOSOPHY

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"At the core of our approach to investment management is the differentiation between price and credit risk. Price risk is the value of an asset changing, whereas credit risk is the borrower's ability to repay a loan."
 
- Marie Redron
Senior Quantitative Analyst

Most of the investment world uses equities and bonds to get exposure to these risks. However, as we have seen in the financial crisis, sometimes even equities and bonds can behave similarly. As such, so-called alternatives were introduced in an effort to diversify.

 

Stocks

Bonds

Alternatives

The prevailing methodology used by many investment professionals is to try to predict which of these asset classes will do well, then strategically allocate amongst any combination of all three.

 

Our problem with this approach is twofold. For one, we don’t believe anyone can accurately and consistently predict future asset prices. Two, the term alternatives is too broad as it can include many different assets such as art, hedge funds and venture capital.

 

Our approach is to break down the entire investment universe according to the different forms of credit and price risk. By investing in all core risks, you are truly diversified and can precisely manage your investment positioning.

Credit Risk

Government

Corporate

Structured

Price Risk

Alpha

Beta

Gamma

Government

Risk: Governments can't repay their debts
Asset: Publicly listed government bonds

Alpha

Risk: Asset prices become uncorrelated
Asset: Statistical, fundamental and structural arbitrage trading strategies

Corporate

Risk: Businesses can't repay their debts
Asset: Publicly listed corporate bonds and private loans

Structured

Risk: Specific projects can't repay their debts
Asset: Alternative credit, project and bridge financing

Beta

Risk: Asset prices go down
Asset: Shares of companies (public and private), real estate and commodities

Gamma

Risk: A specific outcome does not occur
Asset: Venture, special situations, and event driven trading strategies