Industry expertise, investment agility, and disciplined risk management.
We are dedicated to the quality of our products, our people, and our culture.
We build skill-based portfolios intended to diversify traditional holdings.
Our people are among the best in the industry at what they do. We invest a lot in developing them further.
Our culture emphasizes collaborative problem solving, personal development, and high expectations.
Why invest in hedge funds? We believe the right hedge-fund portfolio provides access to returns clients won’t find elsewhere, adding valuable diversification to a traditional investment program. But building the right hedge-fund portfolio is increasingly hard: average hedge funds are no longer good enough. Discernment is essential.
At Magnitude, we are committed to providing our clients with:
Headline performance numbers don’t sway us. We apply a rigorous approach to differentiate between market exposure, manager skill, and dumb luck.
We think risk is much more than just a volatility number. The biggest risks are often hidden. We evaluate market risk in both normal periods and shock periods, when markets are broken. We carefully consider non-market risks, too.
We strive to earn trust by providing clarity on our investment goals, portfolio actions, and expected results. We offer our clients the transparency they need to hold us accountable.
Over the years, Magnitude has written about major investing topics. We’ve shared a few of these pieces below with the hope that they provide insights into not only what we believe, but also how we analyze important issues.
Shocks don’t happen unless investors are surprised. The winding stair of liquidity suddenly looks much narrower than it seemed going in. Investors generally need to be forced to make uneconomic decisions to create and maintain a shock scenario: they need to sell and buy financial instruments away from what their fair value would be during a normal market. Investors are forced to reduce risk at exactly the moment when they believe that risk offers the most attractive prospective returns.
The more difficult part of investing in hedge funds is making subjective judgments about people and the cultures they create. Making great decisions requires a good understanding of which cultures predict persistent investment success… Certain firms seem to incubate cultures that maximize the probability of such success; others do not. It’s our job to try to tell the difference.
A more competitive and efficient market is good for the world, but it’s a tougher environment in which to add value as an investment manager. So should we all just pack up our tents and head back to the land of the 60-40 portfolio? Probably not – or at least, not all of us.