Alpha first - a singular focus on generating alpha worldwide
Man Numeric is committed to the development and implementation of quantitative investment techniques focused on the potential for alpha generation. Our fundamental goal is to maximize total dollars of excess return in clients' portfolios while taking a prudent level of risk.
Consistent with this objective, we have committed significant resources toward building an investment team with strong research and modeling capabilities. Research is conducted in all steps of the investment process; beyond alpha modeling, we conduct research seeking to unearth potential new ways to create alpha, construct portfolios, assess risk, and manage trading costs.
Over the years, we have applied strict asset capacity limitations to ensure that our asset growth will not hinder the excess return goals that we expect to deliver to our clients.
Our priorities include:
- Stock selection processes based on fundamental, causal market relationships
- Continuous research on how to enhance our investment process
- Careful implementation of our models' quantitative signals in our clients' portfolios
- Consistent investment philosophy and stock selection process across all strategies
- Employing market neutral and long-short strategies to maximize excess returns
- Commitment to remain small and focused on performance, rather than on growing assets under management
- Willingness to be paid according to the value we add, through performance fee structures
- Organizational structure designed to attract, motivate, and retain the most capable investment professionals
How we work
Man Numeric's investment strategies are based on our long-standing philosophy that in the aggregate, markets are efficient and real economic performance drives returns. However, over certain time periods, we have observed that markets are inefficient - stock prices fluctuate more than the underlying information set and all new significant information is not perfectly priced.
Our proprietary stock selection models were designed with the intention to capitalize upon these inefficiencies where possible.
Although our investment processes have been refined and enhanced over the years, we continue to adhere to these fundamental beliefs.
While we take a quantitative approach to investing, our view is that fundamental and intuitive underpinnings are a prerequisite for all alpha signals. We separate our models into what we believe are two complimentary views that support our philosophy – Valuation and Information Flow. The models utilize disciplined and risk-controlled techniques and have been applied consistently by Man Numeric since our founding more than twenty-five years ago.
Beyond the quantitative stock selection process, our portfolio managers are responsible for validating all buy and sell decisions. This final oversight helps us to assess the accuracy of our fundamental data inputs, accounts for late-breaking news or other information not incorporated in the model's output, and ensures compliance with portfolio and client guidelines. This essential portfolio manager skill complements our robust quantitative process.
We commit significant research resources towards enhancing our existing investment models, uncovering new potential sources of alpha, and strengthening our implementation capabilities with careful consideration of the effects of trade size, trading venue, and transaction costs.
Research and portfolio construction
In an ever-advancing technological environment, our competitors have equal access to research and data. Coupled with increasingly efficient markets, we must be ever vigilant in improving our stock selection models and seeking truly unique and undiscovered potential sources of alpha.
Research occurs in our portfolio groups, with a focus on examining portfolio behaviors and issues, and in our Strategic Alpha Research group, where the focus is on more aggressive, open-ended innovation. The Strategic Alpha Research group uses a structured approach to evaluating research ideas, monitoring research progress, and implementing discoveries. Through our strategic commitment to research, Man Numeric is able to test and explore an ongoing, varied, and original set of innovative ideas. This allows us to continuously enhance our strategies, remain competitive, and adapt to structural changes in the markets. Our years of experience have left us with a healthy appreciation for the commitment required to uncover new potential alpha sources.
Careful implementation of our stock selection results is important to harvesting each strategy's return potential. We believe successful implementation includes focused portfolio construction, deliberate risk management, transaction cost sensitivity, and trading efficiency.
We build portfolios bottom-up given the existing positions; the potential alpha opportunities that our models identify; the predicted liquidity, transaction costs and risk characteristics for each name in our universe; and the portfolio's risk constraints. The risk constraints are addressed in three distinct areas: Alpha Construction, Portfolio Construction and Analytics/Compliance.
Our on-site trading desk currently consists of traders covering both U.S. and non-U.S. markets in real-time. As a quantitative manager, we believe strongly in the use of algorithms and other forms of electronic trading as generally the most efficient means of execution. Man Numeric was an early adopter of electronic trading and we have invested heavily in this area over the years. Man Numeric maintains several proprietary algorithms in-house that handle a large percentage of our orders. These algorithms allow Man Numeric's traders to focus on time-sensitive or particularly illiquid issues. We believe our mix of traditional traders and algorithms helps to lower overall transactions costs and ensure that ideas become portfolio positions quickly while trying to minimize market impact. We strive for control, quality and efficiency in execution by conducting rigorous analysis on transaction costs. Transaction cost analysis is a collaborative effort between our traders, portfolio managers, and researchers.
We appreciate that our success as a firm depends as much upon the manner in which we manage our business as it does upon how we manage our clients' portfolios. As a result, our business strategy is closely aligned with, and fully supports, our belief in and commitment to generating consistent excess returns for our clients.