RISK MANAGEMENT
Market Correlations
Market Correlations
Market Correlations
Since we invest only in large and mid-cap equities, our portfolio Sharpe Ratios tend to beat the Sharpe Ratios of broader market indices such as S&P 500, Dow Jones Euro Stoxx 50 and Nasdaq 100.
Having a long-biased approach to investing, our portfolio positions are often correlated with the broader market on a directional basis.
The correlations, however, are actively managed on an absolute scale (amplitude of movements) to be significantly lower in volatility than the broader market.
Since we beat the broader market indices by a factor of 2X to 4X, our positions typically rise much more on the upside than the broader market indices – thereby delivering high Sortino ratios and demonstrating clear and considerable Alpha generation capability on a consistent basis.
Risk Metrics
Market Correlations
Market Correlations
Given that our core objective is to generate substantial ‘Alpha’ over benchmark indices on a risk-adjusted basis, we endeavour to generate high Sharpe Ratios relative to broader market benchmark indices.
In our client Separate Managed Account (SMA) portfolios, we have maintained a Sharpe Ratio of over 2.0 for any given quarterly performance period.
Likewise, we have achieved a Sortino Ratio of over 2.0 in our client SMA portfolios as well.
We intend to achieve the same or better results in Neuron's global equities hedge fund as well.
PORTFOLIO EXPOSURE
Position Correlations
Portfolio Diversification
Portfolio Diversification
Exposure to specific sectors and geographies is closely monitored in order to ensure that the portfolio is not over-weight or unbalanced in any particular sector or geography.
Therefore, the Neuron portfolio is less vulnerable to any endogenous or exogenous shocks to global asset markets.
We also work actively and consciously to limit correlations among individual positions held in the portfolio.
Strict stop-loss controls are put in place, particularly for short positions.
Portfolio Diversification
Portfolio Diversification
Portfolio Diversification
Over many years of investing, our portfolio strategy refinements have been achieved from lessons learnt through thousands of trades executed in different market cycles and macro-economic conditions.
At Neuron, we have come to the conclusion that the basic principle of portfolio diversification is the best antidote to a wide variety of risks.
An argument is made that running concentrated portfolios with deep knowledge of portfolio holdings somehow provides adequate risk management is just not grounded in reality.
We do not believe that concentrated portfolios deliver consistent, risk-adjusted returns over the long-term.
Portfolio diversification is emblematic of portfolio resilience and manager humility.