COMBINING HUMAN + MACHINE
Traditional quantitative analysis and black box approaches are almost entirely data-driven or inductive in nature. We believe using only this approach can be fraught with risks.
Our approach is both deductive and inductive, a result of over four decades of studying global capital markets across many cycles.
- Deductive: First, we arrive at the essential theories that explain the cause-and-effect relationships that drive the global capital markets.
- Inductive: We then test these theories through robust quantitative modeling with data going back over 150 years.
THE THREE DIMENSIONAL RESEARCH PROCESS
Modeling valuation factors, global macro-economic factors, and investor behavioral factors
Our objective is to make investments in undervalued asset classes that are poised to begin a period of market outperformance assisted by catalysts which may be macro-economic or behavioral in nature, or both.
Global Macro-Economic Factors
We believe a great deal of information about the future direction of the capital markets is embedded in the levels of and rates of change of nominal and real interest rates around the globe, yield curve slopes and various credit spreads.
Investor Behavioral Factors
Global macro-economic and valuation factors by themselves may not be sufficient in explaining the future direction of the global capital markets.
PORTFOLIO CONSTRUCTION METHODOLOGY
Conventional approaches only solve for Return and Volatility while assuming static correlations across time.
MODERN PORTFOLIO THEORY
Our model simultaneously solves across CAGR (Compound Annual Growth Rate), Sharpe Ratio (returns relative to volatility/risk), and Maximum Drawdown (potential maximum peak to trough loss) in aggregate for the combined asset classes that make up our investment universe which ultimately produce each portfolio strategy we manage for our clients.
3EDGE COMPREHENSIVE APPROACH
Output from our model research serves as our navigation system, informing our dynamic portfolio allocation decisions.