Our investment advisory work is based on strict research and risk management principles.
We specialise in the analysis of risk factors: quantitative and qualitative risks, quantifiable and non-quantifiable, known and new risks. Our research is based on in-depth analysis of financial markets, their participants and instruments, traditional active and passive strategies, alternative investment strategies and private investment opportunities.
Our aim is to find solid long-term investment opportunities, funds which produce excellent risk-adjusted performance and have the potential to grow. And to avoid bad investments. Our analysis covers the past and present and is forward-looking.
We focus on leading indicators such as:
Global trends in macroeconomics. E.g. the Conference Board US Leading Indicators.
Beta potential analysis.
Forecasts of spreads, margins, ratios. E.g. Shape of the US yield curve or 2Y – 10Y spreads.
Alpha potential analysis.
We analyse funds based on full due diligence – on- and off-site. The methodology was developed by Jacob H Schmidt in the late 1990s and has been employed by Schmidt Research Partners in its advisory, rating, training and consulting work.
• Analysis of the Firm
• Analysis of the Fund
• Performance and Risk Assessment
The research approach is holistic: the three pillars interact and influence each other. Each Pillar is assessed separately and awarded an A if appropriate. The final rating of a fund is the sum of parts (A to AAA Rating).
Examples of our early warning system are funds managed and marketed by Absolute Capital Management (ACM), Madoff and Woodford which blew up.
Absolute Capital Management (ACM) was set up by Florian Homm in 2005. We met the manager several times in 2005 and 2006 and analysed both his past and current activities. Because of many question marks and red flags, we decided against any investment into his until then very successful and top-performing funds. In 2007 Homm suddenly resigned from the management of his funds and disappeared. The funds imploded and Homm was charged with investment fraud.
In 2003 we analysed several feeder funds into Bernie Madoff’s low volaitily strategy. After we were granted access to the trading statements, we concluded that the timing of the purchases and sales transactions looked too perfect and suspected either market abuse, insider trading or other irregularities. Despite Madoff’s excellent reputation as past chairman of Nasdaq (in 1990, 91 and 93) and his seat on the SEC Advisory Committee, we recommended disinvestments from all Madoff feeder funds. Madoff blew up in Q4 2008.
After a very long career at Invesco, Neil Woodford (CBE 2013, LSE Honorary Fellowship 2016) successfully launched his own fund management business Woodford Investment Management in 2015 and ran over £ 15 b at its peak. When we analysed the funds in Q4 2015 we noticed the large allocation into illiquid private equity and venture investments. Because of the nature of these investments, the large tail of transactions and the asset–liability mismatch which we deemed unsuitable for retail funds with daily liquidy, we decided to redeem in Q1 2016. Woodford blew up in 2019.