Disciplined and Risk-managed Investment Process

Corestone's approach relies on a strong risk management foundation underpinning each pillar of our investment process, namely setting up the client investment plan, selecting managers, constructing and monitoring the portfolio.

Setting up the client investment plan

  • Taking into account the client’s long term goals and risk appetite, we establish a broad reference asset allocation in line with the current market environment.
  • In addition, we allow for an opportunistic element to take advantage of extreme market events or extraordinary opportunities.

Sophisticated Manager Selection

  • Analysis of managers and asset classes with an eye to the future, not the past.
  • Highly analytical process, combining thorough qualitative due-diligence with a systematic quantitative evaluation of the track-record and holdings-based analysis: Turning data into information significantly enhances our understanding of managers.
  • The aim is to distinguish sustainable skills from hidden style betas and to get a deeper understanding of manager strategies and manager skill-sets. This allows for an appropriate allocation of each manager during the portfolio construction process.
  • Dispassionate review of managers and asset classes in accordance with strategic targets, market conditions and mandate guidelines.
  • Operational Due Diligence: Operational processes must work effectively and efficiently - poor implementation of a good idea can cost a lot of return.

Portfolio Construction

  • Manager Selection in the context of Portfolio Construction: Assembling the best mix of managers, not a mix of the best managers.
  • To go beyond the simple bundling of a handful of outperforming managers, we combine the managers emerging from our thorough bottom-up research process with a top-down asset/style allocation. This robust implementation of investment views and asset allocation is enabled by our internally developed multi-manager platform.
  • Diversification: Balanced distribution of risk stabilizes both the absolute performance and the excess return. The deep understanding of the managers allows for controlled active-risk budgeting and a minimization of manager overlap.

Risk Management & Monitoring

  • Risk Management: Continuous monitoring of portfolios enables us to take action when and where necessary. As markets are dynamic it is imperative to keep a close eye on the portfolio. Our goal is to catch problems as early as possible so that further research can be done or corrective action taken in a timely fashion.
  • Enhanced risk management and control of the client's portfolio enabled by our proprietary monitoring tools. We are able to convert all underlying portfolio positions into aggregate exposures, which allows us to see what really matters in the portfolio. This view of each manager’s current positioning in the historical context enables us to see whether anything is out of order in the client portfolio.