Fund Strategy

The multi-strategy, multi-style fund HCP Black aims for the best risk-adjusted return through active diversification. In the process, we cannot achieve the level of diversification between asset classes brought forward by Markowitz, where all world securities, including wine collections and stamp collections, are added to the diversified portfolio.

However, instead of trying to buy as many assets within as many asset classes as possible, or analysing the historical correlation between securities, we focus on analysing the fundamentals of each investment to see how much it is related to the other investments that we have. This active diversification that starts from the fundamentals should result in high return compared to risk.

The returns are net returns (returns after fees)
The returns are net returns (returns after fees)

Why is HCP Black so defensive?

The 80-year debt cycle has come to an end


I barely have any resistance to change, which makes it easier to have an objective approach to changes in portfolio allocation. Excess returns can be achieved from many different kind of sources when one only learns to keep one’s eyes open. For example, the HCP Focus strategy’s stocks are mainly the kind of stocks that I had considered to be overvalued, just because I didn’t understand the companies’ 25-year trend. Similarly, the small cap companies in the HCP Quant strategy don’t allow large players to invest in them due to lack of liquidity, and only a few smaller investors have the knowhow that we do to perform an extensive fundamental analysis of several companies simultaneously. Cyclicality, which is the Achilles’ heel of HCP Quant and HCP Focus, is balanced by managing HCP Black so that it has enough uncorrelated investments like insurance-linked securities.

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