Portfolio Design

Step 1: Portfolio Design

 

Our portfolio design started by defining a Reference Portfolio whose asset allocation is such that it includes a given percentage of the private equity asset class among its alternative investments. That definition entails a good understanding of the needs and risk preferences of the hypothetical target portfolio and a deep analysis of their compatibility with our own preferences, objectives, capabilities, and limitations.

 

With our main exit scenario in mind, we have generated ideas of individual investment opportunities that would eventually form the portfolio of assets to be included in the Reference Portfolio with the aim of reducing its overall risk.

 

The research process that led to those investment ideas relied predominantly on empirical academic research. The final result of this research is a model portfolio that is diversified with regards to the number of assets and business models.

 

Aside from pursuing the objective of maximising the structural decorrelation against our Reference Portfolio, our portfolio design endeavour was subjected to many constraints such as our strengths and weaknesses, our conceptual choices, our view of human behavior, and our likelihood of successfully raising funds from investors.

 

Our portfolio of assets is thus the result of a constrained optimisation represented by our Proprietary Model. That model translates quantitatively assumptions deriving from scientifically proven principles, empirical evidence, and generally accepted techniques of asset valuation and risk modeling.

 

 

Immanence!

Our private equity firm is built around human identity and behavioural psychology.