At Resonant, we are firm proponents of Quantamental Investing.
Resonant’s investment philosophy can be described as “Quantamental” investment management, which blends the best of both “fundamental” and “quantitative” investment techniques to produce a best of both worlds approach to investing.
By blending quantitative factor-based research with more traditional fundamental research, clients can benefit from two strategies to generate alpha. Specifically, the approach allows for human judgement to handle qualitative inputs and more subjective analysis, while automating processes that benefit from a more systematic approach, particularly those subject to human biases. In addition, typically the two approaches are most effective at different points in the cycle and on different investment time horizons, so combining them makes consistent alpha delivery more achievable.
Total Portfolio Approach
At the heart of Resonant’s investment philosophy lies a Total Portfolio Approach (“TPA”). A Total Portfolio Approach takes a collective view of all the different exposures within a portfolio and how they relate to one another, rather than taking a siloed approach to asset allocation. This allows for improved risk management and a more optimised risk/return ratio.
Under TPA, portfolios are viewed as a collection of exposures to numerous macro-economic, market, style, industry, and stock specific factors. TPA allows us to better manage portfolios towards specific client risk and return objectives, as well as apply specific tailored attributes, such as a focus on after-tax income or capital growth.
We are also able to position portfolios more accurately under certain global and domestic inflation and growth scenarios, dynamically rotating portfolios across asset classes as we move through market and business cycles.
In applying this approach we tend to favour stocks, ETFs and active managed funds that provide transparency and liquidity, over those that do not.
Resonant believes that ultimately the biggest impact on returns comes from asset class positioning, specifically in relation to changes in forward economic growth and inflation expectations.
As a result we will use our fee budget frugally to find the most cost effective means of achieving a desired exposure within an asset class. Where a desired exposure cannot be found using passive investments we will use active managed funds, that are selected based on their ability to deliver the target exposure and alpha.
Resonant specialises in the internalisation of stock selection within Australian Equities. The advent of managed accounts provides a unique opportunity for wealth managers to build transparent and effective portfolios that include the best company investment opportunities. When selecting stocks, Resonant focuses on relative and absolute valuation, industry structure, management quality and multi-year forward earnings profile and guidance to determine the attractiveness or otherwise of an investment over a longer-term horizon (12+ months, up to 5 years). These stock specific fundamental drivers of relative attractiveness can take time to play out, but we believe that in the long run share prices are determined predominately by these factors.
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