Measurable Value Creation
Our mission is to create measurable value for our clients by designing and helping to implement holistic investment programs that are risk-aware, match complexity to needs and resources, and lower costs where possible. We use two novel measures, Pi (π) and Eta (h), that help us to estimate what value might be created, given client circumstances:
We define Pi as the average probability of reaching multiple investment goals. Pi is a flexible measure that helps investors to answer, for example, “What is the chance that our current program will achieve our return target and drawdown limit over an investment period?" And, “Can we increase the chance of meeting our objectives by making any change in the investment program, and by how much do we improve our chances?”
Improvements in Pi reflect:
Improved risk reallocation
Managing investment lifecycle costs
Unlike traditional allocation approaches, we optimize portfolio Pi without having to make unrealistic assumptions about markets and investing behavior. Pi accommodates non-normal returns and does not require us to assume that we know how to measure an investor’s aversion to risk.
Eta is the dollar value of an improvement in Pi. Adding this dollar value to the original portfolio’s expected return generates the improved Pi value. Eta is an intuitive measure of value creation that is unique to each investor. It captures the potential gain in efficiency within the investment lifecycle given the investor’s goals, circumstances, preferences and constraints.