John Ramsey, Portfolio Manager
Investors and their advisers are increasingly recognizing the pivotal role of liquid al ternative investment strategies in building robust, diversified portfolios that withstand varied market environments and deliver supe rior, risk-adjusted returns. As concerns grow over historically- low bond yields and increased volatility across the board, liquid alternative strategies are becoming ever more relevant. Put simply, alternative investing entails seeking out diverse sources of alpha with strategies that demonstrate reduced correlation to traditional asset classes.
"Investors expect liquid alternative invest ments to provide uncorrelated returns. In addition, these returns must be reliable, robust, and sustainable," says John Ramsey, Portfolio Manager, Ramsey Quantitative Systems, Inc. (RQSI). Having been in the business since 1986, RQSI offers liquid and illiquid alternative investment strategies for a wide variety of in stitutional portfolios.
The systematic approach that powers RQSI’s alternative strategies rests on two core pillars technology and transparency. While investors seek out alternative investments to diversify their portfolio and generate consistent, uncorrelated returns, they need a true partner like RQSI that is transparent with them about the core behavioral effects that their trading models capture in the market.
The RQSI team delivers transparency through not only straightforward communication and relevant commentary, but also data visualization tools and robust software. The goal across the board is to equip customers with insights into the unique factors that drive their trading models and framework. Investors have access to a goldmine of data related to performance attri bution, underlying academic research, sensitivity analysis, bench marking, and more.
With their risk-focused, evidence-based, and systematically applied strategies, the company produces durable alpha for inves tors. Alpha is generated through the nexus of two key concepts six orthogonal behavioral and economic effects which drive ongoing research and the 12 Box Framework which forms the core structure of the portfolio. As a quantitative investment manager, RQSI incorporates multitudes of data sources to generate thousands of signals that capitalize on the opportuni ties produced by the six effects.
Besides explaining the core behavioral ef fects to clients, RQSI helps them become more knowledgeable about the market and keep abreast of its dynamic trends. By communicat ing with clients with clarity and helping them understand the performance of their fund, RQSI is taking transparency to the next level.
Through their Asset Allocation Tool, Wiz ard of Odds, RQSI equips wealth managers and RIAs with the ability to understand their existing portfolios, which is the necessary first step to answering how RQSI's liquid alternative strategy might fit alongside existing allocations. The tool enables investors to replicate their portfolio to analyze its historical per formance and identify areas for improvement. For a seamless investment process that promises transparency and customization, RQSI also provides investment platforms Qubit and Socio to wealth managers and RIAs.
RQSI's client partnership with an RIA based out of Lexington, Kentucky, is proof of the firm's edge in data visualization and transparency. Like many RIAs in the space, their clients’ portfolios predominantly looked like traditional 60/40 stock/ bond portfolios prior to adding RQSI’s mutual fund. They were into fixed-income portfolios and were apprehensive of zero yields shooting up. They wanted an alternative to a portfolio with no protection and the added risk of an equity drawdown.
We provide value to clients beyond uncorrelated returns and hope to make them feel they have gained more market knowledge just for having interacted and worked with us
Since partnering with RQSI, the RIA has been educated on how liquid alternatives can improve a basic stock-bond portfolio. In addition, with RQSI's custom, technology-enabled platform for performance reporting, the client can log in at any point and assess how RQSI performs during market fluctuations. Owing to their collaboration with RQSI, the RIA now has a better under standing of their clients’ portfolios overall, as well as how liquid alternatives can effectively serve as an equity diversifier that pro vides solid performance.
With the right mix of transparency and technology, RQSI has a clear competitive advantage. "We nurture client experience. We try to provide value to clients beyond uncorrelated returns and make them feel they have gained more market knowledge just for having interacted and worked with us," notes Ramsey.