As a dedicated software provider for the investment management industry, one of our top priorities is to educate. We do not educate to pitch our software but to educate the marketplace about our approach, which we think will definitively and sustainably improve any portfolio manager’s practice.
The recent black swans that have dominated the news have caused understandable fright among many investors and coinciding with that is a rise in apprehension among their money managers. Why is this? Because recent events are a reminder that the raging bull since March 2009 will finally be met with a formidable adversary: volatility. Vol is back. The past few weeks have brought about known risks: sovereign default risk, investor panic, wild currency swings and unknown risks such as the BP oil spill, Iceland’s volcanic ash, the US intra day market crash, etc.
There has never been a better time for an approach like ours. We think that the key differentiating factor of our software is that it was built by market practitioners, and not under the cozy umbrella of academia. A good analogy of this is being street smart versus books smart. Though the books smart guy may have the better degree and vocabulary, the one that is going to get you through the tough part of town safely is the street smart guy.
Covert Analytics is the streets smart guy. To borrow a saying from Eastern philosophy, “the best defense is a good offense”, and this is precisely what we aim to provide our clients. Our clients, again, are fancy hedge fund managers and simple fee based money managers in Ohio. The punchline we give potential clients is, for sure our market modelling is not the black box solution to solve your portfolio management process issues, but we are however a software that will help you (the money manager) sleep better at night.
The diagram below displays what we call the “Four Cornerstones of Portfolio Management” … as you will note we believe Covert Analytics touches each aspect of this four cornerstone approach.
1) Client Profile – this is set forth by our users when they specify the “focus” of the portfolio along with the target range. As you will note this is a no frills approach to “client specification” … as a bunch of other less relevant details can be included, however we think any advisor will agree these are the key questions to answer.
2) Asset Allocation – any user of our approach will benefit from the Covert Technique to asset allocation, by which markets are selected, quantitative risk indicators are built per market and a dynamic asset allocation (fully backtest-able) mode is constructed.
3) Security Selection – typically this would include a fund manager screening tool, however since our model allocates to stock and bond markets along with commodity baskets, we would urge clients to view markets the same way. Top priority is picking the market and a distant second (on the priority list) is finding the vehicle.
4) Rebalancing & Monitoring – Covert Analytics emphasizes constant rebalancing as new data is incorporated into your model. The monitoring service allows you to keep a better eye on your models and the portfolios based on those models.
We hope you will see why we think our software is a great offense for any portfolio management, investment advisory or hedge fund shop. Please contact us if you have any questions.
Sincerely,
The Covert Analytics Team