Investment Philosophy
At HFR we know that the bedrock of a good investment ultimately depends on the people. We are driven to find superior managers by understanding not only the investment process at the firm but also the people that drive those processes.
We look for entrepreneurial minded and nimble managers that have distinctive investment processes, allowing them to capture alpha in original ways. This uniqueness, or edge, along with high active-share portfolios is the ultimate combination when searching for successful investment managers.
Our goal is to get out of the boardroom and see the investment process at work.
We offer our manager of manager program for hedge funds, traditional long-only funds, and emerging managers of both asset classes.
Manager Selection Process
Sourcing – Managers are primarily sourced through methods such as databases and industry contacts. HFR’s depth of industry contacts lends itself to finding new talent.
Analysis and due diligence – A disciplined and methodical screening process is the basis of HFR’s due diligence process. Quantitative analysis begins with benchmark and peer analysis based on factors such as risk-adjusted returns. More sophisticated measures are then used to get a better understanding of the source of risk and returns. Qualitatively, we want to understand the investment and risk management processes to determine if they are consistent and repeatable. Qualitative analysis also considers items such as ownership structure, AUM, investor composition, and operational due diligence.
Selection – Once the analysis and due diligence are completed and we have confirmed we are working with a best-in-class manager, we will move forward with the allocation.
Portfolio Construction
At HFR, portfolio construction always begins with the client, their investment goals, and understanding the appropriate return and risk objectives. Additionally, the asset allocation approach is broken down into two parts:
– Strategic long-term allocations – based on investors goals and long-term outlook.
– Shorter term tactical or themed allocations – based on short term economic outlook or unexpected investment opportunities.
A properly constructed portfolio will tend to be fairly concentrated across managers and will result in the greatest potential for allocators in active management.
Ongoing Monitoring
Prior to making any allocations, we set expectations with the fund manager – we require a certain level of transparency and touch points. We perform ongoing due diligence on our approved managers, comprised of calls and annual on-site meetings to ensure that they are adhering to their process and investment mandate. Our industry-leading risk management monitors investment guidelines on a daily basis.