Risk management is integrated into the Firm’s investment process, resulting in variable frameworks to manage the portfolio across various environments. The Firm believes risk management is a skill and can be observed by a fund’s ability to consistently generate excess returns (alpha) during normal environments and protect capital during periods of higher volatility.
Before capital deployment, the Firm analyzes quantitative and qualitative risks associated with a position and seeks to eliminate confirmation bias. Throughout the investment horizon, the Firm leverages its risk frameworks to manage portfolio and position-level risks.
Hedging is executed at two levels for the Opportunity strategy:
The Firm constantly assesses risks that the portfolio is exposed to, including industry specific risks, factors and events. The Firm seeks to construct efficient, portfolio-level hedges to provide protection during periods when such risks may be elevated.
The Firm evaluates the potential for short duration events to create volatility in existing positions, such as earnings and analyst days. It seeks to establish short-term, position-specific hedges to protect the position from volatility while the long-term thesis remains intact.
Note: The High Conviction Long Only strategy does not utilize hedges; it may use a limited amount of cash as a risk management tool as it deems appropriate.