Characteristics of Our Investment Process
- People Business - Our investment process is grounded in the belief that genuine investment talent is scarce, and high quality, high integrity people are the key drivers to long-term success.
- Comprehensiveness - Potential investments are rigorously scrutinized by three independent in-house teams consisting of the qualitative, quantitative, and operational due diligence teams, all of whom have the power to veto a potential investment.
- Risk Management - Ongoing risk management frames all portfolio decisions and allows for a dynamic understanding of the risk taken both at the underlying manager level and at the portfolio level.
- The ABSolute - Our proprietary system serves as the nexus of all key firm activity, from our comprehensive due diligence and ongoing risk management, to our highly customizable client reporting and transparency that we offer via our website and our client service team.
ABS employs a three stage investment process comprising qualitative (bottom-up) due diligence, quantitative analysis and operational due diligence. Each independent due diligence team has the power to veto further work on a potential manager, and a manager is only eligible for investment after being approved by each team.
Three Stage Process
1. Qualitative Due Diligence
The objective of the qualitative due diligence team is to source what we believe to be the most talented managers within the equity long/short space. Our process seeks to identify the manager's motivation and competitive edge, and to determine whether there is an alignment of interest. We assign significant value to our determination of each key individual's character, which we seek to confirm through numerous reference checks relying on our extensive network. Additionally, we must have a thorough understanding of the manager's strategy, and feel comfortable with the strategy's return drivers. We will not invest in a strategy that we don't understand fully.
2. Quantitative Due Diligence
The objective of the quantitative due diligence team's analysis is to confirm the research completed by the qualitative team, particularly as it relates to the potential manager's strategy and return drivers. The quantitative team will use data including exposures, attribution and monthly or daily returns to determine where the manager takes risk and how the manager has historically been compensated for those risks (factors, beta, flexible beta and alpha). If the qualitative and quantitative teams are unable to reconcile their perceptions of the manager's strategy, then the investment will not be pursued.
3. Operational Due Diligence
The objective of the operational due diligence team is to confirm that a manager's back office operations strive for industry best practices prior to and during our investment. In the event that aspects of the operational set up are lacking, our team will veto the investment or work with the manager's back office staff to implement all necessary improvements. In short, operational risk should be minimized leaving only those investment risks that we are comfortable with and expect to be compensated for.