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Asset Management

GFA offers a variety of equity and fixed income investment strategies for institutional investors and provides solutions for investors to optimally construct and rebalance portfolios. Investment strategies can be specifically tailored to preferences and constraints of the investors. GFA follows a disciplined quantitative investment philosophy and utilizes an advanced optimization model for examining the risk exposures and characteristics of managed portfolios. The detailed investment process can be further illustrated by a portfolio which is currently managed by GFA.

  • The Strategic Opportunity Portfolio

      • The Strategic Opportunity Portfolio (SOP) is based on a quantitatively driven, high-risk controlled approach designed to achieve incremental return over and above a specified benchmark. This strategy is based on state-of-the-art investment technology for portfolio structuring. The analysis begins with the selection of the appropriate benchmark of comparison. This may be either an existing index or a customized portfolio made up of permissible securities. The universe of securities making up the benchmark is then analyzed by a portfolio optimization system, which takes into account a security's relative yield, expected price appreciation and risk characteristics. The optimization objective is to maximize the portfolio return subject to the desired constraints and a risk target. Risk is in the form of the tracking error of the portfolio relative to the benchmark. The risk analysis is based on a multi-factor approach where the total risk is decomposed into risk exposures at the individual security level. These individual security risk factors are combined by the optimizer to achieve the optimal return and risk profile for the portfolio. The resulting portfolio typically has a yield higher than the benchmark with a tracking error less than 1.25% annualized. Table 1 caps the performance of the SOP for the last two years for an actual $100 million portfolio. For each date, the monthly returns of the SOP are compared to a Screened S&P 500 and S&P 500 Index. The Screened S&P 500 represents the permissible universe for the SOP and consists of securities with a quality rating of A or better. The SOP is optimized to the risk characteristics of the S&P 500 (unscreened) making use of only the Screened S&P 500 universe. This procedure allows achieving the return and risk exposure of the unconstrained benchmark by the use of a constrained universe. Compensating for restrictive policy guidelines using advanced risk analytics is another feature of SOP.

      • The Decision Process

        • Figure 1 provides a schematic of the SOP decision process. This starts with the universe of permissible securities for which the risk and return analysis is performed. The Portfolio Optimization step is part of an iterative process where the resulting optimized portfolio may be reoptimized a number of times to achieve the best risk/return trade-off.


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