Covert Analytics is a software company focused on the innovative application of quantitative investment management principles to asset allocation.

The background

As former money managers, we were frustrated with the deluge of economic data and the inability to make sense of it all. Relying on ‘experts’ and research houses offered no solution either, as frequently we found one convincing bullish outlook and an as-convincing bearish outlook. Susceptible to noise in the short term we wanted to ‘let the data speak for itself’. Skeptical of a black box algorithm or something similar, we needed a tool that would not replace our investment committee, but instead would help reaffirm positioning and outlook.

Why we built it

Ultimately we wanted a framework that could incorporate our ‘views’ on the market (in other words, which economic time series or other financial indicators we believed to be relevant) and help our investment committee on a systematic basis make asset allocation rebalancing decisions. As we managed money across At times we felt we were suffering from ‘asset allocation paralysis’ due to the difficulty of the current market environment and our lack of tools to make sense of it all.

Our guiding principles

Though we believe our approach to be a pioneering step forward for independent asset managers (advisors, family offices, etc), our guiding principles are what define us:

Advisors must avoid cognitive biases

We consider ourselves avid fans of Daniel Kahneman’s pioneering works on how people respond to risk. Avoiding these biases (panicking in a bear market, or being aggressively bullish when a market is rallying) is key in protecting capital across all market cycles.

Hedge funds are not the solution

Managing money across all asset classes in secular sideways markets would lead some to believe that the alpha should be achieved by the smart money. Their performance over the past 10 years has not justified their fees (in aggregate), especially when factoring in liquidity and the difficulty of properly vetting managers.

Better tools will lead to better results

A crucial component to being successful in the money management business is tools which allow you to do your job better, and allow you to spend your time dealing with clients and running your business.

The best defense is a good offense

There are so many headline risks and deep profound changes going on with the world in a constant state of transition. A proactive approach is absolutely necessary in this environment. Buy and hold is not ‘dead’, but in this environment it is lethal.

In summary …

Covert Analytics was built out of frustration with the lack of tools out there for portfolio managers. Rejected from the outset were traditional asset allocation concepts such as mean variance,  modern portfolio theory, etc.  Being money managers ourselves we realized we needed a product which helped drive decisions on a real time basis.