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return true;" ><img height=14 alt="" src="images/sn_about.gif" width=103 border=0 name="sn_about"></a><img height=14 alt="" src="images/sn_mission-over.gif" width=105 border=0 name=sn_mission><A onmouseover="changeImages('sn_mission',sn_mission_out,'button_inside', button_inside_over, 'sn_our_people',sn_our_people_over ); return true;" onmouseout="changeImages('sn_mission',sn_mission_over,'button_inside', button_inside_over, 'sn_our_people', sn_our_people_out); return true;" href="people.html"><IMG src="images/sn_our_people.gif" alt="" name=sn_our_people width="104" height=14 border=0></A><IMG height=14 alt="" src="inside_files/sn_spacer_right.jpg" ></TD> </TR> <TR> <TD td align="center"> <font color="#336666" size="+1"> <strong> Technology &amp; Strategy </strong> <br /> </font> </TD> <td align="center" valign="middle">&nbsp;</td> </TR> <tr> <td colspan="2" class="paragraphpadding"> <br/> <font face="Times New Roman,Georgia,Times" size="-1"> Quatrain"!&nbsp; is a finance and technology division of SCA focusing on dynamic asset allocation and risk management, systematic trading and quantitative research. <br> </font> </td> </tr> <tr> <td colspan="2" class =" paragraphpadding"> <br /> <ul> <font color="#006666" size="-1" face="Times New Roman,Georgia,Times"> <li type=square> <a href="#Engine"> Dynamic Asset Allocation and Risk Management </a> <br /> <li type=square> <a href="#Quatrain"> Systematic Trading </a> <br /> <li type=square> <a href="#Projects"> Quantitative Research and Special Applications </a> <br /> </font> </ul> </td> </tr> <tr> <td colspan= "2" class="paragraphpadding"> <hr /> <p> <font face="Times New Roman,Georgia,Times" color="#336666"> <a name = "Engine"></a> <b> Dynamic Asset Allocation and Risk Management </b> </font> <br /> <br /> <font size="-1" face="Times New Roman,Georgia,Times"> Quatrain&#8482 has been collaborating with SCA to bring powerful analytical tools to SCA and its clients. Quatrain&#8482&#8217;s dynamic allocation platform offers centralized platform that offers a comprehensive portfolio management solution with patented and proprietary algorithms for dynamic allocation and risk management. <br /> <br /> Since 2010, Quatrain&#8482 has begun licensing its Dynamic Asset Allocation and Risk Management platform to financial institutions including endowments, pensions, multi-strategy hedge funds and fund of funds. <br /> </font> <ul> <font color="#006666" size="-1" face="Times New Roman,Georgia,Times"> <li type=square> <a href="people/Files/SCA%20Quatrain%20Summary.pdf"> Quatrain&#8482 Summary </a> <br /> <li type=square> <a href="people/Files/SCA Quatrain Presentation.pdf"> Quatrain&#8482 Presentation </a> <br /> </font> </ul> <hr /> <br /> <font face="Times New Roman,Georgia,Times" color="#336666"> <a name = "Quatrain"></a> <b> Systematic Trading </b> </font> <br /> <br /> <font size="-1" face="Times New Roman,Georgia,Times"> Quatrain"! has been developing advanced quantitative and computational methods for its proprietary trading systems. <br /> <br /> Quatrain&#8482&#8217;s quantitative strategies identify short and medium term investment opportunities across asset classes and seek to profit in a rigorously risk managed fashion. <br /> <br /> Quatrain&#8482 focuses on black-box and gray-box trading systems utilizing, a large array of tools and methods including signal generation, pattern recognition, neural network optimization and genetic algorithms. <br /> <br /> </font> <hr /> <br /> <font face="Times New Roman,Georgia,Times" color="#336666"> <a name = "Projects"></a> <b> Quantitative Research and Special Applications </b> </font> <br /> <br /> <font size="-1" face="Times New Roman,Georgia,Times"> Quatrain&#8482 also offers its quantitative expertise to firms outside the trading and portfolio management industry, particularly in managing R&D pipelines, logistics and supply chain management. <br /> </font> <br /> <br /> </td> </tr> <!-- <tr> <td colspan="2"> <blockquote> <br> <font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><a href="#profiler">SCN Dynamic Manager ProFiler</a></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM<br> </sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><a href="#rde">SCN Reliability Decision Engine</a></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM<br> <br> </sup></font></blockquote></td> </tr> <tr> <td colspan="2" class="paragraphpadding"> <hr> <br> <font size="-1" color="#336666"><b>First, in order to appreciate the value of the SCN toolkit, </b></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>SCA has devised proprietary performance metrics to measure the reliability of achieving robust, absolute returns for portfolios with realistic achievable expectations which are :</b></font><font face="Times New Roman,Georgia,Times" size="-1"><br> <br> </font> <p><a name="reliability-ratio"></a><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Hunter Reliability Ratio</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"><br> <a href="../references.html#sharpe_ratio">Sharpe Ratio</a>, a widely used investment statistic that measures the risk-adjusted portfolio return over and above the safety o</font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">f treasury bills, is a static measure and fails to capture the consistency of manager performance over disparate market cycles. The Hunter Reliability Ratio</font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333"> is a novel statistic (created by Mr. Hunter, CEO) demonstrating long-term <a href="../references.html#Mathematical_Reliability">reliability</a> across multiple market cycles of manager performance within a certain asset class. It is a numerical value that compares an individual manager's performance versus both its relative benchmarks and its peer group. The Hunter Reliability Ratio</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333"> is divided into 4 rolling time-period ranges of 1,3,5, and 7 years, minimizing time period bias.<br> <br> <img src="images/ReliabilityRatio.gif" width="500" height="96" border="0"><br> <br> </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Hunter Reliability Ratio</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333"> is defined as the 'Mean of X yr Rolling Period Sharpe Ratio'&nbsp;over the&nbsp;'Standard Deviation of X yr Rolling Period Sharpe Ratio'<br> <br> </font><font face="Times New Roman,Georgia,Times" size="-1">Managers with Hunter Reliability </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Ratios</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"> greater than their benchmark and peers suggest above average historical performance persistence.<br> <br> </font></p> <p><a name="uncertainty-cushion"></a><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Uncertainty Cushion</b></font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b><br> <br> </b></font><font face="Times New Roman,Georgia,Times" size="-1">The Uncertainty </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Cushion</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1">, defined as the expected return of the portfolio minus three times <a href="../references.html#standard_deviation">standard deviation</a>, is a measure of expected downside of a portfolio. There is a 0.5% probability that that an investor will experience this or a lesser return with the given recipe of managers.<br> <br> <a name="cms"></a></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Catastrophic Meltdown Scenario (CMS)</b></font><font face="Times New Roman,Georgia,Times" size="-2" color="#336666"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><br> <br> </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">CMS</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1">, another downside measure for the entire portfolio, is the weighted and summed worst 12-month drawdown from each manager. It is the return one would experience if every manager in the allocation realized, at the same time, their worst 12-month historical return.<br> </font></p> <hr> </td> </tr> <tr> <td colspan="2" class="paragraphpadding">&nbsp;&nbsp;<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><a name="profiler"></a><font color="#336666"><font face="Times New Roman,Georgia,Times">The </font></font><font face="Times New Roman,Georgia,Times" color="#336666">SCN Dynamic Manager </font><font color="#336666"><font face="Times New Roman,Georgia,Times">ProFiler</font></font></b><font color="#336666" face="Times New Roman,Georgia,Times" size="-1"><sup>TM</sup></font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <font face="Times New Roman,Georgia,Times" size="-1">The SCN Dynamic Manager </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">ProFiler</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"> facilitates selection of fund managers utilizing a two-stage process: <a href="#screening">Screening</a> and <a href="#fitting">Fitting</a>. This process enables effective assessment of managers via comparative statistical tools.<br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <a name="screening"></a><b><font face="Times New Roman,Georgia,Times" size="-1" color="#336666">Screening - </font></b><font face="Times New Roman,Georgia,Times" size="-1" color="#336666">Short-Term &amp; Long-Term Stamina<br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font size="-1">Step One: <i>Screening.</i> Managers within each asset class are compared from two critical perspectives:</font><font face="Times New Roman,Georgia,Times" size="-1"><br> <br> </font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><i>Long-term Performance Persistence (i.e. Hunter-Reliability Ratios</i></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><i>) and </i><i><br> </i><i> Short-term Resilience in the face of convulsive market shocks (i.e. draw-down)</i>.<br> </font><font size="-1" face="Times New Roman,Georgia,Times"><br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <a href="images/Profiler_Screening_SCG_exp.gif" title="Click to see larger image"><img src="images/Profiler-Screening-SCG.gif" width="504" height="332" border="0"></a><br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/profiler-parameters.gif" width="500" height="133" border="1"> <hr> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <a name="fitting"></a><b><font face="Times New Roman,Georgia,Times" size="-1" color="#336666">Fitting - </font></b><font face="Times New Roman,Georgia,Times" size="-1" color="#336666">Maximum Diversification/Minimum Blend Anxiety</font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font size="-1" face="Times New Roman,Georgia,Times">Step Two: <i>Fitting</i> compares Diversification and Blend </font><font size="-1" face="Times New Roman,Georgia,Times" color="#333333">Anxiety</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times"> among managers and asset classes to create a "Best Fit" portfolio, in keeping with the SCN Reliability Decision </font><font size="-1" face="Times New Roman,Georgia,Times" color="#333333">Engine</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times"> Asset Allocation.<br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1"><br> Here is a sample fitting for event driven hedge fund managers:<br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><a href="images/Profiler-Fitting-HF_exp.gif" title="Click to see larger image"><img src="images/Profiler-Fitting-HF.gif" width="500" height="402" border="0"></a><br> <br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <ul> <li type="square"><a href="../references.html#fitting-question-1" title="Click to see answer"><font size="-1" face="Times New Roman,Georgia,Times">Can you identify the Event Driven Hedge Fund managers suggesting "best fit"?<br> <br> </font></a> <li type="square"><a href="../references.html#fitting-question-2" title="Click to see answer"><font size="-1" face="Times New Roman,Georgia,Times">Can you spot the one manager posing as an Event Driven Hedge Fund manager, but is really a small cap/long-only manager reflecting a very high "Blend Anxiety"?<br> </font></a> </ul></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <hr> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="Times New Roman,Georgia,Times"><a name="rde"></a></font><font color="#336666" face="Times New Roman,Georgia,Times"><b>The SCN Reliability&nbsp;Decision Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-1"><sup>TM</sup></font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1"><br> Once the managers have been screened, fitted, and suggested by <a href="#profiler">The ProFiler</a></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"> and the SCA team, the data is entered into The Reliability Decision Engine</font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"> to determine the most reliable, risk-controlled, absolute return allocation strategy. </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Why defer to The Reliability Decision Engine when there are old tools out there? <br> <br> </b></font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1">SCA believes it is time for a reality check: <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <ul> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1">There are no technological substitutes for good instincts.</font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1">The commonly accepted asset allocation tools might be just that - common.</font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1">Worse, they can easily be misapplied, resulting in management habits directly adverse to management objectives.<br> </font> </ul></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Why not allocate assets using what everyone else uses: Markowitz's Mean-Variance Optimization?<br> <br> </b></font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <ul> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Markowitz's formulation of portfolio optimization suggests: An investor should <br> </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Maximize expected return and Minimize risk.<br> </font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Goldman Sachs' <a href="../references.html#black-litterman">Black-Litterman</a> cites two reasons why mean-variance optimization, while academically sound, can produce results that are extreme and not particularly intuitive or of commensurate benefit:<br> </font> <ol> <ul> <li type="circle"><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Unrealistically requires expected returns to be specified for every component of the relevant universe, and<br> </font> <li type="circle"><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Investment Managers tend to think in terms of weights in a portfolio rather than balancing expected returns against the contribution to portfolio risk - the relevant margin in the Markowitz framework*</font> </ul> </ol> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666">As a result, SCA asserts that <b>mean-variance optimization cannot embrace the issues of either asset or liability management.<br> <br> </b></font> </ul></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <p><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>&nbsp;If not Markowitz, then what?</b><b><br> </b></font></p> <p><font face="Times New Roman,Georgia,Times" size="-1">Markowitz's portfolio modeling techniques and NPV models treat return volatility as a one-dimensional risk. However, because the future is uncertain, the potential risk and return for any future action is constantly changing. This fact, in turn, gives value to the right (but not the obligation) to take or refrain from taking the action at a future time. Such rights are termed options and </font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Real Options allow us the advantage to take better account of Uncertainty and Time.</b></font><font face="Times New Roman,Georgia,Times" size="-1"><br> </font></p></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Real Options before The Reliability Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>:<br> </b></font> <p><font face="Times New Roman,Georgia,Times" size="-1">Past limitations of Real Options analysis precluded a strategic asset/liability portfolio application. The Real Option model had only been used to analyze</font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"> individual resource decisions</font><font face="Times New Roman,Georgia,Times" size="-1">, </font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>not</b></font><font face="Times New Roman,Georgia,Times" size="-1"> to select an optimized </font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>portfolio of options</b></font><font face="Times New Roman,Georgia,Times" size="-1">. In addition, there was no effective way to quantify the effects of diversification on the overall risk and uncertainty of a portfolio.<br> </font></p></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>Understanding The Reliability Decision Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b><br> </b></font> <p><font face="Times New Roman,Georgia,Times" size="-1">In the Real Option model, the potential value of a resource allocation is not simply inherent value, but additionally, the value of being able to undertake future courses of action based on the present resource allocation.<br> <br> The Reliability Decision </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Engine</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"> exploits four fundamental concepts to manage fluctuating uncertainty and time to advantage - the four "R"s:<br> <br> </font></p></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <ul> <blockquote> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1"><a href="#reliability">Reliability</a><br> </font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1"><a href="#real-options">Real Options<br> </a></font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1"><a href="#reversion-to-mean">Reversion to the Mean<br> </a></font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1"><a href="#robustness">Robustness<br> </a><br> </font> </blockquote> </ul></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <hr> <a name="reliability"></a><b><font color="#336666">Reliability<br> <br> </font></b><font color="#333333" size="-1">Reliability measures the mean-time-to-failure for a recipe of assets given a desired target return.<br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/Reliability_Bread_Water.gif" width="500" height="409" border="0"><br> <br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>We "assure bread with our water" by</b><b><br> </b></font> <ul> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b> -Blending an array of assets with a recipe of uncorrelated risks, and</b><b><br> </b></font> <li type="square"><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b> -Stretching "mean time to failure" toward infinity</b><b><br> </b></font> </ul></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"> <hr> <br> <a name="real-options"></a><b><font color="#336666">Real Options<br> <br> </font></b><font size="-1" face="Times New Roman,Georgia,Times">Real Options capture the advantage of uncertainty and time and give us the flexibility to impact positively the investment outcome through effective risk management<br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/RealOptions.gif" width="500" height="364" border="0"><br> <br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <hr> <br> <a name="reversion-to-mean"></a><b><font color="#336666">Reversion To The Mean<br> </font></b></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1"><br> Think of Reversion to the Mean in terms of a pendulum responding to the laws of physics and gravity. While it may swing in both extreme directions (i.e. the radical Bull and Bear Markets), any specific performance level is not consistently sustainable over the course of time. </font><font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b> Performance will, naturally, revert to the "mean"</b></font><font face="Times New Roman,Georgia,Times" size="-1">, or its natural center of gravity. In other words, the Universal Laws of Nature are just that - Universal.<br> <br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/Reversion_To_The_Mean.gif" width="500" height="342" border="0"><br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font size="-1" face="Times New Roman,Georgia,Times"><br> </font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b>The Reliability Decision Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b> recognizes Bull and Bear extremities and does not chase "hot dot" managers or dismiss excellent managers temporarily out of favor with the market.</b></font><font size="-1" face="Times New Roman,Georgia,Times"><br> <br> </font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b>Rather, the Reliability Decision Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b> typically "senses" good managers on the verge of opportunity as well as those who have fulfilled their expectations.</b><b><br> <br> </b></font> <hr> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <a name="robustness"></a><b><font color="#336666">Robustness<br> <br> </font></b></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font size="-1" face="Times New Roman,Georgia,Times">The Reliability Decision </font><font size="-1" face="Times New Roman,Georgia,Times" color="#333333">Engine</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times"> quantifies uncertainty both from historical data and by constructing hypothetical scenarios that go beyond the historical range of experience.<br> <br> For example, in the event of a severe market crisis, there is a high probability that all assets will be highly correlated with one another and simultaneously yield their worst returns. The </font><font size="-1" face="Times New Roman,Georgia,Times" color="#333333">RDE </font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times"> would quantify this in terms of a scenario that reflects the below-average returns and high correlations between assets in times of crisis.<br> <br> In the wake of fluctuating uncertainty, we construct potential extreme scenarios, and then create an optimal asset allocation accounting for these extremities.<br> <br> </font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b>The Reliability Decision Engine</b></font><font color="#336666" face="Times New Roman,Georgia,Times" size="-2"><sup>TM</sup></font><font size="-1" face="Times New Roman,Georgia,Times" color="#336666"><b>, therefore, &quot;Imagines the Unimaginable&quot; and devises a robust, reliable portfolio that effectively manages realistic and achievable client expectations.</b></font><font size="-1" face="Times New Roman,Georgia,Times"><br> <br> </font> <hr> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><br> <font face="Times New Roman,Georgia,Times" size="-1" color="#336666"><b>SAMPLE REALLOCATION SCENARIO DELIVERING BOTTOM-LINE IMPACT</b><b><br> <br> </b></font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><font face="Times New Roman,Georgia,Times" size="-1">Here is a sample reallocation scenario obtained from The Reliability Decision </font><font face="Times New Roman,Georgia,Times" size="-1" color="#333333">Engine</font><font face="Times New Roman,Georgia,Times" size="-2" color="#333333"><sup>TM</sup></font><font face="Times New Roman,Georgia,Times" size="-1"><br> </font></td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/Reallocation-Scenario.gif" width="500" height="678" border="0"><br> <br> <hr> <br> </td> </tr> <tr> <td bgcolor="#333333" width="196"></td> <td colspan="2" class="paragraphpadding"><img src="images/Reallocation-Statistics.gif" width="500" height="227" border="0"><br> <br> </td> --> </tr> <TR bgcolor="#336666"> <td colspan="3" bgcolor="#336666"><font face="Times New Roman,Georgia,Times">&nbsp;</font><font size="-1" color="white" face="Times New Roman,Georgia,Times">© 2011 Strategic Capital Allocation Group</font><font size="-1" color="white"> </font></td> </TR> <tr bgcolor="#b0b0b0"> <td colspan="3" bgcolor="#b0b0b0"><font color="white" face="Times New Roman,Georgia,Times"> &nbsp;</font><font size="-1" color="white" face="Times New Roman,Georgia,Times"><a href="../disclaimers.html">Disclaimers</a> &nbsp;&nbsp;&nbsp;<a href="../privacy.html">Privacy</a> &nbsp;&nbsp;<a href="../terms.html">&nbsp;Terms of Use</a></font></td> </tr> </TBODY> </TABLE> <!-- End ImageReady Slices --> </BODY> <!-- Mirrored from www.scagrp.com/Inside/tech.html by HTTrack Website Copier/3.x [XR&CO'2007], Wed, 10 Oct 2007 04:37:29 GMT --> </HTML>