Risk Managed Fund Process

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Risk Managed Fund Process

  1. 1. Risk Managed Fund Summary
  2. 2. Investment Selection – Process Overview Optimal Mix (Model 3) Re-iterative process, if necessary Qualitative review per Search Objectives and Interview. Includes ratio analysis. Find most efficient mix subject to risk tolerance. (Model 2) Best Peer Alpha - Minimize by eliminating those with high correlation yet lower performance to each other. Reduce to less than 100. (Model 1) Initial Screens – 4 Year Management Tenure; Best Fit Alpha >0; Correlation to Benchmark Index – Best Fit R2 >.65 Reduce from 49,000 to 4,000 Overall Objective: (a) Select set of 11-12 Active or Passive Managers for Fully Diversified Portfolio; or (b) select single manager.
  3. 3. • Returns Search Objectives • Consistent out performance of benchmark • Consistent out performance versus peers • Downside protection; substantial upside participation • Risk-Controlled Approach • Lower volatility of Composite, good diversifiability of unsystematic risk • Good risk-adjusted returns • Superior Kurtosis, Treynor, and Sortino ratios with Positive Skew. • External Diversification across Other Pension Assets • Internal Default diversification within Fund • Depth of Team • Experienced and consistent team • Limited exposure to “star” Manager – prefer Team Approach • Personal commitment to strategy. No style drift. • Process/Strategy • Discipline to style/process • Appropriate amount of assets under management • Sound approach whether Bottom-up or Top-Down • Depth of Firm • Going Concern/Stable Organization • Commitment to Strategy • Research capabilities – value-added • Competitive Fees • No 12(b)-1 Fees • Only Class A or Better quality, oldest share class.
  4. 4. Monitoring • Dynamic financial and economic time series inherently exhibit some form of instability or nonstationarity. Thus daily data of correlation coefficients are collected and tested for nonstationarity. • Funds that are not covariance stationary are replaced so that you are never left with a portfolio with highly correlated components.
  5. 5. Initial Screens • Best Fit Alpha > 3% • Base Currency US dollar • Use the oldest share class and highest quality, i.e. Institutional trumps Class A which trumps Class B. • Inception Date <7/1/2005 • Opened to New Investors
  6. 6. Intrepid Small Cap (ICMAX) versus Best Fit Index Russell Mid-Cap Best Fit Alpha = 13.34% annualized
  7. 7. -10.5% Correlation 0.87 +12.9%
  8. 8. Annualized RAR Return-ITD* Volatility Risk Managed Acct (0.049) -2.7% 1.8% Ciba DB ex Risk Managed (0.130) -5.8% 2.2% S&P 500 (0.360) -10.5% 3.4% * Annualized from Inception-to-date: From May 5th, 2006

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