VALUE

Measurable Value Creation

Our mission is to create measurable value for investors. We use two novel measures, Pi (π) and Eta (h), to estimate what value investors potentially can create.

Portfolio Pi (π)

Pi is the average of the probabilities that an investor will reach desired investment outcomes. Pi reverse engineers what investors want their investment dollars to deliver. It takes into account the probability that each desired investment outcome will be achieved and the relative importance of each.

 

Investors communicate Pi as a simple, average percentage. 

 

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 Pi by making any change in the investment program, and by how much?”

 

Eta (h)

Eta measures whether investment program changes that increase Pi are “worth it.” Eta is the economic value that an investor stands to gain by making the changes that lead to a higher Pi value.

 

Investors communicate Eta as a percentage return or dollar amount. 

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. It enables risk choices to be considered in concert with other investment needs and translated into language all investors can understand.

Investors can use Pi and Eta to evaluate the economic impact of changes in one or more of the following lifecycle decisions or activities:

 

  • Asset class weights

  • Risk factor sensitivities

  • New managers, products, or securities

  • Alpha assumptions

  • Risk management practices

  • Portfolio rebalancing strategies

  • Payout algorithms

  • Tax strategies

  • Expense ratios and other investment fees

  • Investment lifecycle costs

  • Desired investment outcomes

 

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