The conventional tools of investment management have been found wanting. Many strategies are based on economic forecasting (itself an activity with little track record of success) on the tenuous assumption that there is a correlation between economics and financial market performance. The other traditional valuation methods, such as price earnings ratios, price/cash flow, price/book and replacement cost accounting, have not been consistently reliable forecasting tools. The disillusionment with active equity investment is evidenced by the migration of half of global equity portfolios to passive management.
A combination of practical experience and academic research has led Solent to design algorithmic solutions for investment management using such techniques as trend following, momentum and risk parity. The efficacy of this approach is demonstrated in the menu item “Chart Room”. Some investors are so wedded to the predictive active school of asset management that they will not accept a formulaic approach. It is evident, however, that the Solent algorithmic approach provides superior risk adjusted returns to passive, since it reduces volatility and the drawdowns which canbe so catastrophic in the context of sequence risk.
The Solent techniques are applicable to all asset classes including equities, commodities, foreign exchange and some elements of fixed income.