Objective investing
Fair fees
Simplified process
Research Overview
In 2005, with thirty years investment experience along with ongoing analyses, Midwest committed to a fully quantitative process in the securities industry. The reasons were:
- To maximize meaningful, consistent, and sustainable above-average net returns without increasing risk.
- To minimize the two major obstacles to investment success: persistent subjectivity; egregious annual fees; and the current status of America’s financial system.
- To accomplish these objectives in a highly efficient, low-cost manner.
There are always advantages and disadvantages to any path taken. However, virtually all the negatives can be controlled, and the firm is highly confident making decisions based on viable statistics and common sense. To learn how many of the strategies are formulated and implemented in the High Net Worth / Trusts-Estates, Non-Profit, and Institutional segments, view our Research Studies.
Advantages
Return Advantages
- Process can be time-tested to determine the significance of their edge
- Process can eliminate significant behavioral biases from the process
- Process can evaluate a large opportunity set
Risk Advantages
- Process can identify virtually all sources of risk in a portfolio
- Process can reduce operational risk
- Process can reduce the risk of being fooled by randomness
- Process can help investors to maintain confidence during the inevitable periods of underperformance
- Process can further diversify a multi-manager portfolio
Cost Advantages
- Management fees should be meaningfully below market averages
- Portfolio transaction and liquidity expenses should also be below average
Disadvantages
Data Disadvantages
- Data base(s) may have significant inaccuracies or omissions
- Data base(s) may lack relevant factors, or have unnecessary factors which can create noise
Managerial Disadvantages
- Portfolio manager(s) lack sufficient experience in back-testing research and real-time analyses
- Portfolio optimization can result in very poor out-of-sample performance when inputs are estimated with significant error(s)
- Dependent on historically significant factors continuing to be successful
Conclusion
Midwest strongly believes that a well-designed and well-implemented quantitative process meaningfully increases your probability of success. Moreover, even if a process is simply “average,” the manager should be in the top one-third of its peers. This is because management fees should be significantly lower than most active managers.
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Past performance does not guarantee future success. All investments are subject to risks, including the possible loss of principal. You should consider Midwest based on the suitability of its investment strategies in relation to your objectives and risk tolerance. By using this website, you acknowledge that you have read and accepted Midwest’s Terms of Use.