ÆON’s core belief is that there is a minority group of managers in the investment community who, over reasonable time frames, can be expected to produce alpha. ÆON also believes that these managers may work within any type of company, from a small boutique to a very large investment house, and may adopt one of many investment styles. ÆON is comfortable selecting ‘star’ managers, who act with a high degree of autonomy, as well as more team based processes, while being aware of the potential risks inherent in both.
Given these beliefs ÆON does not automatically screen out certain investment styles or manager types in its selection process. Rather the approach is to try to identify managers whose success has been based on their investment skill (rather than luck). ÆON believes that there is no one, simple way of verifying the presence of such skill and hence the strategy selection process draws on a multitude of qualitative and quantitative techniques which, when combined, give an informed view. At all stages in the selection process analysts are looking for evidential support for the presence of key manager skills and verification of the manager’s stated investment style and process.
ÆON also believes that passive instruments are not homogenous and different types of instrument will pose different types of risk. Although the criteria used to assess passive strategies are different to those we use for active funds, we apply exactly the same level of detailed research and analysis when selecting passive instruments as when researching active fund managers. We assess passive strategies at three levels: the provider of the strategy, the passive instrument itself and the index which the strategy is tracking. Among the criteria we look at are: corporate structure and stability of the provider; size, presence and commitment to passive products by the provider; does the instrument track the index; methodology of replication; full cost of ownership; liquidity of the instrument and the underlying index; tax status, counter parties and collateral policies and exposures.
ÆON deploy a holistic screening process to the partners with whom we wish to work along the points mentioned above, but most critically insuring we deliver fair outcomes for our Clients creating returns in line with the risk profile and insuring costs are scrutinised and maintained to ensure our Clients get the best deal. By risk managing the downside and keeping costs to a minimum we believe the upside will take care of itself; an approach that remains to this day uncommon in the industry.