Morgan Cowen | Portfolio Analysis

Portfolio Analysis

Portfolio Analytics

We believe that successful investing requires a blend of quantitative and qualitative analysis. Our commingled funds and separate accounts are constructed with investment rigor. We utilize both internally and externally-developed tools and models that enable us to monitor client portfolios. Principal among these tools are:

The Morgan Cowen Allocation Expert Tool

The Allocation Expert Tool is a proprietary model developed and enhanced internally with assistance from external resources, including a number of leading academicians and other experts. Our AET is a financial simulation tool that we utilize to assist our clients with the asset allocation decision. With this tool, we help our clients understand the expected outcomes and potential risks of selected asset classes and the interrelationships of those asset classes. This tool helps us think about how changing, adding, or removing an allocation to any given asset class will affect the risk/return profile of a portfolio on a forward-looking basis.

The AET is a forward-looking, yield curve-based model that simulates potential future economic scenarios and asset class returns within those economic scenarios. The AET helps investors examine portfolio choice alternatives under different conditions of economic uncertainty on a forward-looking basis. Spending/payout policies are important considerations in decision-making and are also incorporated into the AET. By incorporating cash flows in the model in the form of spending, distributions, or grants, investors are able to understand the long-term ramifications of asset allocation, spending and cash flow decisions.

The AET is a model that is based on the term structure of interest rates. We believe that the investment returns of the asset classes included in the model have been and will continue to be a function of the economic environment, in particular, changes in the yield curve. Our model takes the current yield curve, changing economic factors that affect the curve to project returns for each of 20 asset classes in each of the “new” yield curve environments. The projected returns are based on the regression of the historical relationship between these asset classes and the yield curve. The model then takes each of the 1,000 “new” yield curves as the next starting point and repeats the process, building another 1,000 yield curves, and projecting returns in those environments.

OUR INVESTMENT APPROACH

Morgan Cowen investment professionals operate as one team, applying one investment philosophy and process across our core strategies.

We believe that indices are historic and do not reflect future opportunities. Therefore, we are not influenced by the benchmark or our peers, preferring to focus on growing the absolute value of clients’ capital over the long run. These beliefs are reflected in our fundamental quality stock driven approach, and our portfolios have a high active share.

Quality is essentially determined by all internal as well as external factors impacting a business and its long-term prospects. However, we believe that...

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OUR PHILOSOPHY

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COMMITTED TO ESG PRINCIPLES

We have a long-established interest in Environmental, Social and Corporate Governance (ESG) issues. We believe that ESG issues can affect the performance of investment portfolios to varying degrees across...

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INVESTMENT STRATEGIES

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EXPERIENCED MANAGEMENT

Our unwavering pursuit of this goal has established us as a preeminent investment management firm. Today, our firm remains investment centered and guided by a corporate strategy that focuses on maximizing our clients' returns.

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Diverse Product Line-up

Morgan Cowen offers a broad range of investment products. Our management teams are guided by well-defined, repeatable investment processesand are dedicated to fully invested, active management approaches.

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Allocation Expert Tool

The Allocation Expert Tool is a proprietary model developed and enhanced internally with assistance from external resources, including a number of leading academicians and other experts. Our AET is a financial simulation tool that we utilize to assist our clients with the asset allocation decision. With this tool, we help our clients understand the expected outcomes...

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In order to have the ability to focus on the long term, the model runs these simulations for one to two decades into the future. Fundamentally there are two core processes at work in the AET: defining the asset classes in terms of their historical relationship to the yield curve and projecting the returns of those asset classes in 1,000 different future economic scenarios for each year.

The AET has many advantages over mean variance optimization. In addition to generating a distribution of potential outcomes and different economic scenarios (which cannot be accomplished with mean variance optimization), the AET’s term structure model has advanced features that distinguish it from most other forecasting models. The AET considers asset allocation from the user’s perspective and then generates projected returns, standard deviations, distributions, and probabilities associated with that asset allocation. With this type of analysis, the user is able to understand the likelihood of achieving goals rather than merely focusing on a median and standard deviation of an “optimal” portfolio produced by a mean variance optimization.

Risk-Assessment

Morgan Cowen monitors and controls the volatility, concentration, and potential performance deviations from benchmark targets using market risk software. Morgan Cowen is currently using state-of-the-art software for market risk measurement and stress testing that provides market exposures and sensitivities across a broad range of instruments including, Commodities, Equities, Fixed Income, FX, Mortgages and Structured Credit, using multiple Value at Risk (VaR) methodologies and flexible stress-testing.