KPS Advisors LLC
We possess stringent criteria when selecting managers. We can much easily tolerate loss of opportunity than loss of capital. We focus on managers with:
Highly differentiated portfolios.
Attractive track record > 12 months.
Assets under management < $2B (US managers) and < $1B (Asia managers).
Use little to no leverage.
Reasonable liquidity profile.
We belong to a close-knitted and experienced global network to help in global idea generation and manager due diligence.
Qualitative due diligence through interviews with fund managers to determine their comparative edge by focusing on manager experience, soundness and quality of investment process/style, risk management, hedging methodology and business skills.
Quantitative performance and risk analysis on both individual manager and portfolio levels.
Holdings based (13F) analysis to understand what has been driving performance.
Decompose performance into stock selection and sector allocation.
Develop appreciation of portfolio concentration, uniqueness of names, turnover over time.
Be cognizant of overlap in names between existing and prospective managers. Crowdedness in common names is a serious current problem in the hedge fund industry.
Perform due diligence on operational and business aspects of the firm.
Create customized portfolios based on each client's risk/reward objectives and liquidity needs.
Focus on investment diversification to improve returns consistency, maximize risk-adjusted returns and reduce market correlation.
Diversification based only on asset class does not work well as we learnt in 2008 that correlations among different asset classes go to 1 under extreme market conditions.
We diversify our portfolios in terms of investment strategy and style, portfolio net and gross exposures, time frame, sector, geography and market cap.
Objective, unbiased, independent review of current portfolio investments and recommendation for subsequent actions.
Help clients prevent from incurring further losses by redeeming from under-performing managers.
Manager sourcing and selection
Investment due diligence
Portfolio construction and asset allocation
Evaluation of existing investments and current portfolio review