Our investment philosophy rests on two main beliefs:
We believe that active management can create alpha in specific areas. Active managers are hampered by portfolio management constraints and a flawed distribution system forcing them to dilute their convictions. While studies show that on average, active managers do not outperform their benchmarks, certain active stock-pickers have shown that they can add value on a consistent basis in specific areas of the market.
We believe that sectors provide a better framework of evaluation. The traditional style box, which classifies and confines an active manager according to their investment style, is too narrow and arbitrary. Accordingly, we focus on sectors, as opposed to style or other types of classification, to identify trends and biases in a manager’s stock selection ability.
JMCAM’s philosophy thus emphasizes a novel approach in researching money managers for the construction of a diversified equity portfolio. We utilize and combine active managers, focusing solely on their identified area of expertise (i.e. in which sector they have consistently added value) as opposed to their full portfolios.
We believe that by thus redesigning sector building blocks, we can create investment solutions that maintain the benefits of multi-management, spreading risks and contributions, without over-diversifying the aggregate portfolio or diluting the convictions of our underlying managers.