Investment Strategy

Manager selection

Three dedicated teams perform the investment, risk management and operational due diligence for any new investment under consideration. They work independently and cover the areas of their respective expertise. The due diligence process has been designed with significant overlap in order to leverage the different approaches deployed by the three teams in evaluating the practices used by the manager. The same three teams are also responsible for the ongoing monitoring of our investments.

Alpha creation

Our research has shown that when a portfolio of hedge funds is diversified in terms of managers’ trading style, then the alpha generated at portfolio level is more sustainable and of greater capacity than alpha generated by a single hedge fund. Alpha in the Tarchon portfolios is created from the bottom up through manager selection and trading style diversification. To maintain and monitor the style diversification of our portfolios, we have developed in house advanced analytics that are used in the construction and the risk management of our funds.

Risk management

We use an expanded risk management toolkit to quantify and monitor sensitivities to risk factors, exposures to asset classes, leverage and liquidity risk. In addition, all our investments satisfy the Tarchon requirements for relevant transparency which is a prerequisite for making an investment. Based on the information we obtain we perform meaningful portfolio stress tests and scenario analysis, which are relevant to the current exposures and are not constrained by the tenor of the underlying hedge fund.

Active management

Research at Tarchon focuses on ensuring that our investment strategy remains current with the investment environment. Adopting our approach of analysing performance and dissecting risk to the prevailing market conditions is integral to delivering consistent performance.