equity mandates

The Orthogonal Investments approach to equity stock selection is value-oriented, bottom-up and largely independent of classifications. Instead, the selection process is uniquely risk-focused and relies on:

• An objective, first-pass screening of the investable universe for undervalued candidates. Proprietary historic data is used. The screening process pays no attention to notoriously inaccurate forecasting, 3rd party buy or sell recommendations, company size, or other sector classifications
• Thorough investigation of screened candidates with a high emphasis on analysing company-specific risk and detecting whether the company's valuation is commensurate with this risk.
• Bottom-up portfolio construction with share weightings determined firstly by company and then sector valuation conviction levels.
• "Maximising orthogonality" through an iterative and exhaustive portfolio risk-adjustment process (absolute and relative to benchmark) in which cross-sectional valuations, sectoral equity risk premia, credit risk, inadvertent exposures, macro-economic variables and other experience-led risk inputs are utilised to adjust share and sector weights.

fixed income mandates

In fitting with our value philosophy, our fixed interest portfolios grind out yield enhancement. We appreciate and have become proficient in the mathematical properties of bonds, since bonds (more so than equities) are acquiescent to mathematical techniques. Thus, when we lack a high conviction on a duration stance (which is much of the time) we use quantitative means to immunise funds against unwanted exposures, while maximising desired attributes. We have developed proprietary software to assist in this regard. Because Orthogonal is a team that also does thorough bottom-up equity research we comprehensively analyse corporate bonds, which can be useful at times in meeting our objectives.

balanced mandates

The discernibly frequent departure of both equities' and bonds' prices from their fundamentals is evidence enough that active asset allocation can be rewarding. At the same time, it is demonstrably more difficult than stock selection, as fewer ex ante identifiable mis-pricings occur. Again, we engage our value philosophy, albeit with some different tools. We seek to calibrate, using sophisticated proprietary models, the forward looking risk premia priced into markets and then to increase exposure when these are rewarding (the market is nervous or frightened) and to decrease exposure when these are low (the market is complacent or too optimistic). Much more so than stock selection, asset allocation can require deep reserves of patience and stoicism. The internal and external pressure to take positions is often out of kilter with the frequency of identifiable opportunities.