Investment process & Risk management
Investment research requires painstaking attention to detail without losing sight of the big picture. It challenges the team's analytical skills and ability to draw the right conclusions and combine all the different pieces of the puzzle in a compelling and winning way. Our specialized management teams identify the most attractive companies in their respective universe, maintain a constant dialog with company executives and leading industry experts, and compare consensus views and expectations with their own
We follow a four-stage investment process:
Determining the investment universe
In the first stage we define the investment universe in conformity with the given investment guidelines, in particular as regards region, sector focus, market capitalization and liquidity. As an active portfolio manager and firm believer in bottom-up fundamental analysis, we tend to broaden our investment horizon beyond the typical benchmarks. Lack of access to company representatives and corporate governance issues can disqualify a company from the universe.
Idea generation and stock selection
A profound understanding of the complex interplay of myriad factors in their respective fields helps our analysts and portfolio managers to form sound opinions. They examine the key fundamental factors of a company's success before analyzing its actual operating performance. In this process, our experts evaluate growth and margin potential, taking into consideration market positions, product pipelines, innovation power, brand power and other factors. The resulting findings are then thoroughly analyzed with the support of an extensive network of leading experts and industry specialists to determine their sustainable viability. This approach sets up apart from many of our competitors and is a key factor for the high-quality research we produce. Only in a subsequent stage do we create and analyze quantitative company models based on classic, fundamental data.
After the stock selection process are made, the optimal weightings are determined using sensitivity and simulation analyses. Company-specific risks should be commensurate with the respective return potential; inordinate risks associated with individual stocks or sectors must be balanced out. To ensure optimal portfolio diversification, stock correlations are addressed as are qualitative aspects such as portfolio diversification by including appropriate sub-themes or, in the healthcare sector, for example, by investing in biotech companies with products at different stages of clinical development.
Risk management Performance is the result of intelligent risk management. At Bellevue Asset Management risk management is an integral part of the entire investment process. Our risk management and controlling process serves to realize the following four goal:
|Performance analysis||Ensure a competitive performance relative to the underlying benchmark and to peers|
|Risik analyisis||Establish and analyze all the required risk parameters to elucidate risk and performance contributions|
|Investment governance||Ensure compliance with external and internal investment rules and regulations|
|Operational risk||Ensure quality control of asset management operations throughout the entire value added chain in portfolio management|
A team of risk managers and product specialists measure and periodically analyze the performance data of our portfolios over various periods in absolute terms, relative to benchmarks and peers, and in risk-adjusted terms. Performance reports are discussed with the portfolio management teams and the Executive Board at least once a month.
Risk measures such as VaR, volatility, tracking error, etc. are appraised at least once a month (ex-ante and ex-post) and discussed with the respective portfolio management teams.
Our investment governance processes are designed to ensure that our investment activities are in accord with external and internal investment rules and regulations. Legal and regulatory requirements essentially comprise Luxembourg and Swiss investment fund laws and other legally binding guidelines. A distinction is made between active and passive breaches of these requirements and guidelines. Active breaches result from incorrect investment decisions by the portfolio management team while passive breaches result from movements in market prices without any active intervention by the portfolio management team. Investment governance processes ensure that almost all such infractions can be prevented or, should they nevertheless transpire, that they are quickly rectified.
The Risk Management Team monitors the quality of the critical business processes and evaluates the major risk and process performance indicators for all internal and external parties, including the Fund Administrator, Transfer Agent, and the Management Company/Directors Office. Insights gained from day-to-day business activities are evaluated to ensure continual optimization and improvement of operational efficiency across the entire value added chain.
- Risk management and performance analysis tool based on the “Bloomberg PORT Function” featuring a customized “front-end tool” for visualizing data
- Determining key risk factors (absolute and relative to benchmark) – Tracking Error ex-post, Tracking Error ex-ante, Information Ratio, Sharpe Ratio, Active Share, Portfolio Volatility, Value-at-Risk, relative Value-at-Risk, etc.
- Performance attribution – multivariate (sectors, countries, currencies, market cap and fundamental factors); Attribution Stock Selection
- Risk decomposition ex ante and ex post – Breakdown of tracking errors into systematic risks (sector, country, style factors) and stock-specific risks (stock selection)
- Monitoring of portfolio-specific investment guidelines - maximum position size, diversification (5%/40% limit), country/sector deviation, etc.
- Portfolio simulation – correlation analyses, simulated historical return distribution, risk analysis (tracking error, VaR, etc.)