The equity market is a complex adaptive system1 from which prices are determined by the collective emotional interpretation of information by investors
- In the short-term participants discount fundamental information with either excessive euphoria [greed and leverage] or undue desperation [fear and deleverage]
- Only in the long-run [on average] do they properly discount underlying business fundamentals and thereby achieve a state of equilibrium [price = value]
We take a very rational, theoretically sound and disciplined approach to interpret information, its impact on fundamental value, and the risks associated with this value
We generate excess returns for our clients by
- Using better quality, and more proprietary sources of information [quality + scarcity = return]
- More effectively processing information into efficient portfolios [focus + reliability = return]
1Complex adaptive sytems are described as being in a state of self-organised criticality. "Self-organised" means that there is no leader. The system arises from the interaction of many underlying individuals. "Criticality" suggests nonlinearity. More specifically, the magnitude of a perturbation within the system (cause) is not always proportionate to its effect. Small perturbations can lead to large outcomes, and vice versa.