Absolute Return and Portfolio Insurance
True to the saying “less is more”
Alternative investment strategies offer attractive potential for alpha and display a low correlation between equities and bonds. Such innovative and dynamic investment strategies are a cornerstone of our policy of achieving the long-term goals of our investors. Reliability, attention to detail and a good deal of healthy commonsense are not only features of our models but also qualities of the people responsible for them.
Our laboratory for these models is Applied Research. This is where our cutting-edge research, development and testing take place. The art of quantitative portfolio management lies in the economical construction of parametrized models – along the lines of "less is more". An infinite number of factors have the potential to impact the price formation of risk-carrying assets. The clue is to use these factors as a basis for designing robust models while applying healthy commonsense and a wealth of experience to ensure that they continue to fulfill their purpose in the future.
Integrating risk management into portfolio construction
Our objective was and still is to align portfolios more strongly to the client's risk budget. The first pure risk-based investment policy, known as "TORERO Fixed Income", dates back to the end of the last century. Since then, the team has worked on developing the TORERO system into a genuine multi-asset solution. TORERO can be applied as portfolio insurance both in mixed special funds as well as in master funds in the context of overlay strategies, the objective always being to dynamically manage the systematic risks, also known as "beta".
Since 2006, Metzler Applied Research has been developing quantitative strategies which are used to generate uncorrelated excess returns – known as "alpha". Over 20 such strategies are successfully in use in a wide range of special funds. The choice and weighting of the investment strategies are always aligned to the particular client requirements, most importantly their individual risk tolerance and profit target.
Products defined according to client needs
Metzler Applied Research works closely with portfolio managers and client relationship managers. They have a common understanding of how to creatively combine science with practice. The shared goal is always to develop workable systems which are adjusted to the needs and risk tolerance of the client.
Interdisciplinary team in the service of the client
The Alternative Investments & Quantitative Strategies team comprises 20 specialists able to draw on years of experience in their respective fields. The department can boast state-of-the-art expertise at all times thanks to its close contacts with science and research. The team is also supported by Metzler's IT specialists who, for example, programmed a front-office module to specifically serve the quantitative strategies. This assures a stable system landscape and efficient straight-through processing. Ultimately the interdisciplinary collaboration, short decision-making channels and knowledge transfer are to the client's benefit.
The portfolio managers play a key role in team interaction: They explain the functionality of the models to the investors, establish the client's needs together with the relationship manager and finally select the suitable quant models in association with Applied Research and individually adjust them to the client portfolios. They also ensure that the regroupings triggered off by the models are realized smoothly.
At the moment quantitative models are applied to manage close to EUR 8bn of assets at Metzler in more than 50 special funds and a dozen overlay mandates.
You can contact our specialists at any time – just write to us! firstname.lastname@example.org.