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Improving return by systematically managing risk

A medium risk total return strategy focused on providing an attractive risk adjusted return on invested capital by actively managing the portfolio asset allocation. Our aim is to always hold a portfolio which is appropriate for the outlook. This implies participating in upward trending equity markets, by holding a maximum of 70% in equities when the outlook is positive. It also implies the will and ability to limit portfolio risk and protect capital by reducing risk decisively, holding a defensive strategy with zero allocation to equities when the outlook is most challenging.

To increase the probability of getting the allocation right we rely on a large quantity of macro and market data selected over the recent 20 years. This data is generally of the same type as is known from minutes of central bank meetings and commentary of investment managers, including both financial markets and more fundamental micro and macro inputs, covering financial stability, credit availability, interest rates, consumption and employment. The difference between our process and that of a traditional manager or investment committee is that, by applying behavioural finance algorithms, we use this data in a fully consistent and systematic way to assess when the market risk is high, and it is therefore not worth being invested in equities, and when the market is attractive.

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