New York (HedgeCo.Net) – HedgeCoVest is always looking for new models to add to the platform. We want investors to have as many options as possible, but we also want the models to be the best available. As a result, the managers and models go through a very thorough vetting process before we make the models available to investors. With that being said, we are pleased to announce that there are five new models being added to the platform. The first three are live and ready to receive allocations while the last two will be live soon.
Two of the models are from Maxwell Thacher, the Maxwell Thacher Global Opportunity model and the Maxwell Thacher US Equity Yield model. The Maxwell Thacher Global Opportunity model is a long-only equity model that is focused on absolute returns. The investment strategy is designed to generate superior risk-adjusted returns over the long term by capitalizing on large global themes through investments in underfollowed companies and applying investment themes to last round private equity transactions to increase portfolio alpha. The strategy employs capital in a select number of high conviction ideas over the long term to decrease portfolio turnover.
The Maxwell Thacher US Equity Yield model is a long-only equity model that is also focused on absolute returns. The investment strategy is designed to generate superior risk-adjusted returns over the long term by investing in high quality dividend paying equities with attractive fundamentals and risk/return profiles the manager believes will lead to price appreciation over the investment horizon. The strategy employs capital in a select number of high conviction ideas over the long term to decrease portfolio turnover.
The third model comes from Innovative Capital Management, LLC and their Innovative Long/Short model. The investment philosophy centers on the interpretation of what the stock market and investments are actually doing based on precedent based studies spanning 27 market cycles over the past century. They are fond of pointing out that they are in the “Interpretation” and not the “Prediction” business. The process starts by combing over 100 proprietary custom screens that represent search criteria for a variety of general market conditions. The selection criteria combines company fundamentals, earnings estimates, industry group statistics, corporate data, and many technical factors. The sole purpose is to find superior new investment ideas for investors in their early emerging stages. Leading equities are identified using a combination of technical and fundamental factors consistent with historical models of the best performing stocks over the past five decades. Typically, initial purchases are emerging from new basing patterns that provide a sound basis for further institutional accumulation that ultimately leads to meaningful price increases, while providing low risk entry points on a technical basis.
This is not a “buy and hold” strategy. The investments will change as the stages of the market and business cycle change, and especially as new market cycles evolve. Turnover will increase in a whipsaw market while holding periods will lengthen in a strong bull or bear market. While no one can achieve perfection in their stock decisions, the goal is to be in phase with the market and to locate the most worthwhile investment areas. At the same time, they endeavor to employ a risk management campaign that, in most cases, will afford them expedient knowledge of a poor investment selection before allowing material damage or opportunity cost to occur in the portfolio.
The fourth and fifth models have not been added yet, but they are coming soon. The HIT Capital Value Investment model is the fourth new model. HIT Capital Investment Model’s philosophy is predicated on the capitalization of market and structural inefficiencies. Market inefficiencies are derived from identifying securities priced below intrinsic value, while structural inefficiencies are derived from flawed tracking mechanisms found in exchange traded products (ETP).
Securities priced below intrinsic value are discovered through a two-step process. A universe of publicly traded domestic companies are selected and ranked by a proprietary set of fundamental metrics. The top tier companies derived from the fundamental metrics proceed through an extensive qualitative review. The companies which are deemed furthest below intrinsic value are purchased and held until intrinsic and market values equalize.
Structurally inefficient exchange traded products are generally identified using industry specific knowledge, i.e. recognizing a product which greatly under performs its benchmark. Once identified, the product is thoroughly back tested to simulate historical trading. If successful, the product is qualitatively and quantitatively reviewed until it is structurally understood. Once understood, a trading model is designed to optimize potential profits across multiple sectors domestically and internationally.
HIT Capital believes its strategy will generate positive alpha over the long term as it capitalizes on its ability to uncover undervalued securities and structurally inefficient exchange traded products. In support of the strategy, 80% or more of the investments are long biased due to the belief in opportunistic gains and performance achieved through growing gross domestic product, long term global growth and inflation.
The fifth model that will be added is from Veritas Wealth Management and their Veritas Short Premium model. The objective of the model is to create alpha and maintain profitability regardless of the market’s direction. The strategy is to sell or “write” out-of-the-money options on highly liquid stock index ETF’s. Trades are usually made 4-6 weeks prior to contract expiration. The strike price is determined by a proprietary model that has withstood rigorous historical back-testing and has performed as expected since inception Q1 2011. This model creates a disciplined approach to take regular profits as well as indicates appropriate exit points to cap losses in the near-term. Risk is further mitigated through the purchase of protective put options, which in turn can lead to investment gains in the event of a market crash. We see our strongest performance when market volatility increases, giving investor’s a hedge/ diversification against their long portfolio holdings. When the market opportunity presents itself, we will use 5 to 10% of the portfolio to implement straddles, strangles and long call and put butterfly option strategies on individual equities.
And there you have it, five new models being added to the HedgeCoVest platform. Of the five, two are long-only models—one global in orientation and one a domestic yield-focused strategy. Two of the models are long/short strategies and the fifth strategy is an options-oriented strategy. These five models provide HedgeCoVest investors more diversity when making allocations. We encourage you to visit the platform and start tracking and researching these new models.
