Our Process
Quantitative with common sense.
We’re a consistent bunch. Our distinctive investment approach is driven by the TWIN Equity Model™ and Fundamental Tilt®, methodologies developed at TWIN by our founding team. No optimizers here—we use our collective 50+ years of portfolio management experience to build consistent, risk-controlled value-added portfolios.
OUR PHILOSOPHY
Our job is to identify and capture the reliable and predictable sources of return while minimizing the impact of more arbitrary sources of risk. The heart of our investment philosophy is the belief that the systematic application of in-house quantitative research coupled with rigorous risk control and applied fundamental insight in portfolio construction affords the best chance of achieving alpha on a risk-managed basis.
We’re students of the markets and understand that adaption is critical for persistent, long-term success. Our approach isn’t black box. We respectfully recognize that not all investment models are effective in all market environments, so we carefully study the environment and adjust risk accordingly. We also believe that fresh ideas often come from the outside and supplement our robust internal research efforts with new perspectives and conversations with the academic community.
Diversification is key.
Diversification and risk-control are strong elements in our portfolio construction process. We are acutely focused on active risk (tracking error relative to the benchmark), ensuring we are aware of the differences between the portfolio and the benchmark. Sectors and industries are held at a weight close to the benchmark. If a sector is represented in the benchmark, it will also be represented in our client portfolios. To avoid individual security concentration, sector and industry allocation risk, we diversify stock selection by limiting the maximum stock and sector exposure relative to the benchmark.
Implementation
TWIN differentiates itself from the mainstream investment community through the distinctive combination of a two-part process.
- The foundational element is the “Bottom Up” TWIN Equity Model™ – a quantitative multi-factor Alpha forecasting model utilizing original research
- No optimizer here, we then implement our “Top Down” proprietary Fundamental Tilt® portfolio construction process
TWIN EQUITY MODEL™
Alpha Forecaster Blends Multiple Drivers of Equity Performance
Our proprietary TWIN Equity Model™ ranks stocks from universe constituents based on their relative attractiveness. This multi-factor model was developed in-house to dynamically weight elements of Value, Growth and Quality. It produces a composite score ranking that reflects a combination of specific peer-relative future alpha drivers. Buy/Overweight candidates are chosen from highly-ranked stocks while Sell/Underweight candidates come from low-ranked stocks.
FUNDAMENTAL TILT™
Our "Secret Sauce"
Our Fundamental Tilt® approach is a key and distinguishing factor in our proven investment process because it allows us to analyze and apply fundamental insights at the market-segment level. Fundamental Tilt® leverages a diverse set of market indicators to formulate portfolio judgments; a holistic view. We use the insights gained to tilt portfolios toward the best style, capitalization segment, and other thematic elements within benchmark. We’re keenly focused on risk posture and take an active approach to managing portfolio risk via dynamic tracking error.
The goals of these approaches are to drive forward-looking assessments about the economic and investing environments, and to always take the most strategic level of risk.
TOOLS & RESEARCH
We are firm believers that a collaborative effort between research and portfolio management—throughout the investment process— is vital to delivering a consistent result.
Research is the driving force behind our investment approach. Based on our research, our portfolios gain exposure to critical factors that drive stock returns and we shift emphasis in our model to the elements that are most important in the current environment. Research here is a cohesive process, conducted with an eye toward the portfolio construction and trading functions that it will ultimately drive. Our research team uses quantitative tools to rigorously test the value and reliability of investor behavior.
