Add alpha with respect to traditional investment strategies
Investment Mandate:
Long and short - but not market neutral
AAA to defaulted debt
Across product type - loans, bonds, CDS
Sovereign and corporate risk
Emerging and developed markets
Up to 20% in equities
Risk Approach:
Consider risk characteristics under both normal and stress conditions
Consider risk characteristics over both short and long horizons
Assets with similar short term risk characteristics under normal conditions can have very different
risk characteristics under conditions of shock
Assets with similar short term risk characteristics under short horizons can have very different
risk characteristics under long horizons
Deeply undervalued securities will typically have similar short term risk to fairly valued securities
but dramatically lower long term risk
Cash producing securities with similar short term risk to non-cash producing securities can have lower
long term risk on account of lower exposure to valuation risk
Diversification may decrease specific risk exposure but not exposure to market wide events and shock
Large positions in deeply undervalued assets increase specific risk and short term risk but could lower
long term risk of permanent impairment of value