At Siharum, we utilize a unique and differentiated investment strategy, the Manager First® approach. Developed using 15 years of experience in manager selection and asset allocation, we believe that our investment strategy will enhance the overall investment results for our clients.
The typical investment consulting approach is formulaic, overly focused on asset allocation with too many asset and style categories (or boxes). In these frameworks, allocations are targeted within a narrow range, based on expected risk and return assumptions that are not very accurate. We believe this approach is best described as "precision without accuracy." This process can be costly to clients in two ways; first, the manager selection process generally leads to mediocre managers who fit the "boxes" and avoids exceptional managers who don't; second, it creates additional costs such as trading and excessive taxes. In addition, the amount invested in a specific manager is determined by the asset allocation process and not by the level of conviction in that manager. These model-driven, "plug-and-play" investment portfolios are utilized in order to serve a large pool of clients with a small number of advisors. As you might suspect, this approach generally produces mediocre investment performance over the long term.
Unlike the typical approach, our process focuses on finding high-quality managers first, and then combining these select group of managers in a portfolio that takes into consideration the client's objectives and risk tolerance.
Manager Selection
Siharum uses a structured process developed over the years by the firm's founder that seeks to find exceptional managers irrespective of their asset or style class affiliation. While the process starts with quantitative screening, the qualitative assessment and the exercise of judgment are the critical components of the process. In addition to a proven track record, the Siharum recommended manager should have a unique or differentiated investment approach that we can identify as the "driver" or the primary factor contributing to the superior investment results. Siharum's "typical" manager will focus on generating absolute returns and minimizing downside risk.
Portfolio Construction
Using a select list of high-quality managers, Siharum Advisors builds a customized portfolio for each client, unique to his/her situation. To help us do this effectively, we have developed our own proprietary allocation tool, a method of allocating assets within three investment timeframes. We divide the client’s assets into three pools or "buckets"; one bucket for short-term assets, one for intermediate-term assets, and one for long-term assets. We then design a separate asset allocation strategy for each "bucket" by considering both the quality of the managers and the asset allocation framework. We believe that there are only three major asset classes: equities, fixed income, and risk-free assets (cash). Because our process does not target sub-asset categories, clients benefit from having high-conviction managers representing a larger portion of the portfolio allocation. Our process will monitor, but not target, diversification across various sub-categories, such as market-cap, region, style, and economic sectors in the equity and fixed income areas.
Alternative asset categories will be included as part of the equity or fixed income allocation. We believe that hedge funds are not an asset class. While they might play a role in client portfolios, given the excessive cost of hedge funds, the use of them will be limited to a select few exceptional managers.
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